Although leaving profits in the company can be tax-efficient, you need money to live on, so you should consider the best ways to extract profits from your company. A salary will meet most of your needs, but do not overlook the use of benefits-in-kind, which may save income tax and could also result in a lower national insurance bill. The total tax and national insurance can be as much as 40%.
Six strategies to save NICs
- Increasing the amount the employer contributes to company pension schemes
- Share incentive plans (shares bought out of pre-tax and pre-NIC income)
- For companies, disincorporation and instead operating as a sole trader or partnership
- Instead of more salary, paying a significant one-off bonus to reduce employee contributions (this will not work for directors)
- Paying dividends instead of bonuses to owner-directors
- Provision of free childcare or childcare vouchers.