Richard Curtis suggests possible alternatives to salary and dividends.
Many in business will trade through the medium of a limited company and the directors will generally be remunerated by the payment of dividends or salary. The former are taxed on the recipient and must be paid out of profits subject to corporation tax, while the latter are subject to National Insurance contributions (NICs) as well as income tax.
So, are there more tax-efficient ways for owners to extract value from their companies?
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Loans
The company could make a loan to the director. The company will incur a tax charge when the loan is made, which is repayable when the loan is repaid. The director does not incur an income tax or NICs liability on the amount loaned but is taxed on the benefit of an interest-free or low-interest loan, calculated by reference to HMRC&rsquo
