Kevin Read explains the impact of recent tax changes on profit withdrawal from small companies.
There are many factors to consider when deciding whether to run a business as a sole trader or via a limited company, but tax has always been a key one.
Although there are some tax advantages of being unincorporated (e.g., the ability to carry back losses arising in the first four fiscal years of trade against other income, or lower National Insurance contributions (NICs) rates), the ability to choose when to draw income from a company (and are therefore taxable on it) and the option of taking mainly dividends (to avoid employer and employee NICs) has made the company option much more tax-efficient, particularly for businesses with high profits.
A shift in the tax landscape
Almost surreptitiously, this area has evolved over recent years to the extent that
