TAX TIP OF THE WEEK - Looking to retire?

Looking to wind down your business with a view to retirement? What’s the most tax-efficient way to do this?

The general advice would be to liquidate the company so you can take advantage of extracting the profits as capital instead of income.

This means if you are an additional high-rate taxpayer so can reduce the tax from 39.35% to 20%. 🔽 This can further be reduced to 10% using the Business Asset Disposal Relief.

👔The downside to this is you will most probably need to hire a liquidator for this and their fees will start at around £4k

An alternative approach doesn’t involve liquidating it at all and leaving the money in the company. This can then be drip fed to you over the years by extracting dividends up to the higher rate tax bands.

This would effectively mean the income will be taxed at a mixture of 0% & 8.75%. 🏆

Not only would this save you tax, but also the hefty liquidator fees. ⚠️Bear in mind this only works if your other sources of income don’t already push you into the higher tax bands..

I hope this was helpful, for lots more tax tips and strategies get a copy of our 71 ways to save tax checklist.