Profit Extraction

From April 2023, a Corporation Tax rate of 19% applies to profits up to £50,000.

If profits exceed this amount, they will be subject to Corporation Tax of 25%.

However, marginal relief (fraction of 3/200ths) will apply on profits up to £250,000. This means an effective corporation tax rate of 26.5% on profits between £50,000 – £250,000.

For example, company with profits of £100,000, Corporation Tax will be;

100,000 x 25% =                                                          £25,000

Less marginal relief (250,000 – 100,000) x 3/200 = £2,250

Corporation tax =                                                         £22,750

I.e. (50,000 x 19%) + (50,000 x 26.5%) = £9,500 + £13,250 = £22,750

The Company Profit Extraction calculator provides an indication of the Net Spendable Income for the client (and employed spouse) and shows how the profits are distributed.

Based on an input of the amount of company profit available, this calculator allows input as to how that profit can be used for either salary, dividends, pension contributions, or to be retained within the company.

It will calculate the total net spendable income and a pie chart of how the profits are distributed.

There is also an additional ‘Alternative’ sheet.

This enables you to input an alternative profit extraction strategy, which will demonstrate the benefits of Pre & Post planning that could be considered by the client.

Plus an ‘Additional Profits’ sheet. This demonstrates whether these additional potential profits should be taken as Salary, or Dividends, or Pension.