Extracting profits in 2024/25

Running your own business is rewarding, but you also need to be able to access your company’s profits for personal use. This guide will explain how to extract profits from your personal or family company in a tax-efficient way for the 2024/25 tax year.

Different Ways to Take Out Profits

There are several options available, each with its own tax implications. Here’s a breakdown of the most common methods:

  • Salary: Paying yourself a salary allows the company to deduct the salary and employer National Insurance contributions from its taxable profits. There’s a sweet spot: for 2024/25, a salary of £12,570 is tax-free for you and reduces your company’s corporation tax bill. However, there might be some employer National Insurance to pay depending on your circumstances.
  • Dividends: Dividends are generally taxed at a lower rate than salary and come with their own tax-free allowance (set at £500 for 2024/25). They’re a good option for taking out additional profits after you’ve paid yourself the optimal salary. Keep in mind that dividends are paid out of after-tax profits, and the company must have sufficient retained profits to cover them.
  • Other Options: You can also extract profits through benefits-in-kind, rent if you run the business from your home office, or by the company making pension contributions for you.

Remember, It’s Not One-Size-Fits-All

The best way to extract profits depends on your individual circumstances. For example, if you don’t have a full 35 years of National Insurance contributions to qualify for the full state pension, paying a small salary can be beneficial.

Getting Professional Advice is Key

This guide provides a general overview, but tax regulations can be complex. To ensure you’re extracting profits in the most tax-efficient way for your situation, consulting with a qualified accountant is highly recommended. They can help you navigate the specifics and develop a personalised strategy.

Accountants across Yorkshire

Our accountants are based all around the Yorkshire region, although we work remotely with clients nationally. If you are looking for accounting services in Yorkshire, you can find out more here:

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