TAX TIP OF THE WEEK - Offered shares in friends company?

So you been offered shares in your friend’s company? Is it more tax-efficient to buy them personally or through your ltd company?

There are generally 2 ways to get a return when investing in a company:
1️⃣ Return in the form of dividends, or
2️⃣ Increases in the value of the shares

Both of these are taxed differently depending on how you invested, for example where you receive a dividend you could pay personal tax at rates ranging from 0% to 39.35% depending on your other income.

However, where your company receives a dividend from another company there is NO tax. 🚀

The situation is different where profit is generated from increased share value. In this situation, the company will be taxed at corporation tax rates and there will be additional personal tax when extracting the profits. 😩

On the other hand, it will be cheaper if it was a personal investment due to CGT reliefs available to you.

So in summary the decision whether to invest personally or via a ltd company depends largely on whether you expect the returns to be generated from dividends or the sale of the shares. 🛣️

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