Leave profit alone or take a bonus

xabi

Im a contractor with my own ltd company. I will have a profit in the business account at year end and wondered should I leave it there and pay Corp tax or pay myself a bonus. I'm already paying myself at the higher rate of income tax and I don't really need the extra cash. What's the most tax efficient thing to do?

adrianw

At a very basic level if you have €1,000 profit you pay 12.5% tax leaving €875. Then when you do eventually take the cash out you'll pay circa 49% tax leaving €437.50. So effective rate of circa 56%.

That's assuming no close company surcharge.

DmanDmythDledge

All depends on the individual circumstance. Ideally, you would allow the reserves to build up in the company and claim retirement relief once you are in a position to do so. It's a very tough question on how best to advise without knowing every detail.

exaisle

Undoubtedly the most tax efficient thing to do would be to go see a good accountant. No pun intended and it would be silly to take financial advice offered here...

the_pen_turner

put it into your pension.

or buy more tools etc

Pawwed Rig

It would depend on a multitude of factors. Time for a tax planning meeting with your tax adviser i would think.