Take out what you deserve
The purpose of your small business is to earn the money that you had been earning from your full-time employment. Taking any money out of your business is the reward for your scarifies for giving up your job and work even harder than what you were doing for your employer. So would that be a crime to expect a higher reward from your business? I don’t think so. You deserve that for your hard work. And one way of increasing that extra reward is to extract money in a more tax-efficient way.
There are a few ways you can take money out of your limited company as a director:
– You can operate payroll for your business and take a salary for yourself.
– You can take dividends from your business.
– You can employ someone from your family with low income to help you out and pay them a salary so that they can pay for their expenses rather than pay it from your pocket.
– You can also give them some shares for that same reason so that they can get some dividends.
– You can get reimbursed for any expenses you are incurring on behalf of your business (travel/phone bill/use of home etc.).
– You can take money out from your director’s loan account balance, if available.
– You can borrow money from your company.
– You can charge interest for the loan you have provided to your business.
However, keep in mind, any kind of money extraction planning depends on the individual’s personal circumstances. All of the above methods have different tax consequences depending on what your situation is. Not all of them are efficient for everyone. Please contact your accountant to take advice on the best way you can structure this so that you can take out maximum by paying a minimum amount of tax. After all, this is your hard-earned money.