Most business owners focus solely on tax compliance – filing returns on time and ensuring all expenses are properly documented. While important, this approach misses the bigger opportunity: strategic tax planning that can transform your business’s financial position.
At KPPCA, we are experienced in helping businesses move beyond mere compliance to implement sophisticated tax strategies that create substantial long-term value.
1. Optimise Your Salary-to-Dividend Ratio for Maximum Tax Efficiency
The way you extract profits from your business can dramatically impact your tax bill. With careful planning, you can withdraw approximately £50,000 from your business while paying just £3,000 in income tax
Double the Benefit with Income Splitting:
If you have a spouse or civil partner, this strategy becomes even more powerful:
- Make them a shareholder in your company
- Split dividends between you both
- Each can extract £50,000, totaling £100,000
- Total tax bill of approximately £6,000 (6% effective rate)
This approach must be implemented correctly to satisfy HMRC requirements. Your spouse/partner should have legitimate involvement in the business and appropriate share ownership.
2. Use a Corporate Group Structure for Growing Reserves
If your business has accumulated significant reserves or expects substantial growth, a corporate group structure can offer remarkable tax advantages and flexibility.
The Corporate Group Advantage:
The main advantages of establishing a group of companies include economies of scale, risk sharing, and significant tax benefits.
- Groups can manage Corporation Tax through a single company using the ‘group payment arrangement.’
- Assets can be transferred between companies within the group without triggering a disposal that would be subject to Corporation Tax on any gains.
- VAT can be accounted for at the group level, with transactions between group companies being exempt and only one entity remitting VAT on behalf of the group.
- Protect core business assets from operational risks
- Create multiple tax planning opportunities
3. Think Beyond Traditional Pensions: SSAS & SIPP Strategies
While traditional pensions remain tax-efficient, they restrict your investment options primarily to stocks and shares. However, Small Self-Administered Schemes (SSAS) and Self-Invested Personal Pensions (SIPP) open up remarkable possibilities for business owners.
Powerful SSAS & SIPP Advantages:
- Loan up to 50% of pension assets back to your company
- Fund business growth with your own pension
- Commercial interest rates become pension contributions
- Secured with appropriate collateral
- Purchase commercial property within your pension
- Your business pays rent to your pension (tax-deductible expense)
- Rental income grows tax-free within the pension
- Property appreciation occurs in a tax-advantaged environment
- Invest in a wide range of alternative assets
- Commercial property
- Unlisted company shares (with restrictions)
- Land development opportunities
We are Here to Help
Smart tax planning isn’t about aggressive avoidance – it’s about understanding the tax system and making informed decisions that benefit your business for years to come.
With over 18 years of experience helping business owners optimise their tax positions, KPPCA provides the expertise you need to implement these sophisticated strategies successfully.
Book Your Strategic Tax Planning Session – Our tax specialists will analyse your specific situation and identify which of these strategies offers the greatest potential benefit for your business.
