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Many business owners rely on dividends as a tax efficient means of cash extraction from their business.
Whether you should choose dividends as a your prime source of income is open to question, as there are a variety of cash extraction strategies that should be considered before selecting dividends as your sole remuneration strategy.
Business owners familiar with the dividend extraction route may at some point be blocked from taking dividends as this is normally allowed provided you have sufficient distributable reserves on your balance sheet.
Since the Companies Act 2006 however it is possible to increase your distributable reserves by amalgamating any monies held in your Share Premium Account.
This means that you can increase the amounts paid as dividends, although there may be an even more beneficial way of extracting these monies….
Are you making the most of your cash extraction strategies, if you are not sure, contact one of our Financial Planning Consultants, at Pareto Lawrence we offer both Financial and tax planning advice to corporate and private clients.