Not paying 50% on £1,000,000
3 Answers
50% is the top rate of personal income tax. It is paid only on income over the applicable threshold.
If your company earned those profits, you will also be paying corporation tax, and probably VAT. There are ways to reduce the amount of corporation tax, and if you retain the profits in the business, you may be able to convert your realisation to a capital receipt, which will be taxed as a capital gain, likely at a lower rate than taking it as income.
Speak to an actual tax lawyer or accountant. Not a cheap one, or a scheme-monger, either. If you don't, you will probably end up paying more than 50%.
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One error: you never pay VAT. VAT, for businesses, is a running through tax - they pay what they collected from their customers. If they make a profit, they collect more vat normally than they pay on their purchases, though international businesses (like mone) do the opposite (no vat on sales within the eu to companeis on other cuontries) and my local government happily pays e out the money again every month. VAT is not relevant at all. Also, with am illion pound in profit a lot may be running through capital gains tax, not counting for personal income tax. – Net Tecture 13 years ago
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@NetTecture: No, you do actually account for VAT to the Revenue, based on your own taxable supplies. You may deduct your input tax from that account if you have received a VAT invoice for those inputs. – Marcin 13 years ago
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With a million revenue not. Even with a lot less not. VAT is accounted for, but it is not revenue. Revenue is sans VAT. – Net Tecture 13 years ago
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@NetTecture: You're free to use any definition you wish, but this isn't advancing the discussion. The OP refers to "profit" (with quotes), and who knows what that includes. – Marcin 13 years ago
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The definitions of revenue and profit are pretty clear. or do you run around and think steaks are vegetarian? Profit also has a clear meaning. – Net Tecture 13 years ago
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@NetTecture: "Profit" may be clear; ""Profit"" is not. Your definition does not appear to accord with that commonly used. – Marcin 13 years ago
There is a lot of tricks to lower legally the amount of taxes you have to pay at the end of the year as an entrepreneur. I am not sure this is the goal of the site to speak about that, and depending on your country things may vary, so you should consult a tax expert.
Basically you can lower the amount you have to pay by making the company to pay for a lot of expenses (phone, internet access, car for instance). You can also buy on your own (through a specific kind of holding) some real estate, then you can rent the real estate to the company (in some countries the taxes are not the same for real estate earnings than for classical earnings). The idea is to take a loan for buying an office space, then to rent it to the company. Since you have a loan to reimburse, you won't pay taxes on the money you earn by renting the office space to the company.
Once the loan is finished, you just move to another building with the same trick. But again, ask to an expert since can be different in your country.
Yes there is a definite way to lower the tax you're paying. Depending on your corporate structure, it would involve branching off to another country. It is legal, but you should consult a professional tax lawyer on the matter as I am not to familiar with EU tax laws. I paid mine about $180,000 to set up my tax shelter, which was half of what I saved by him doing so (that was our contract). I wouldn't see someone who charges less than 100k and under the age of 60 for their services, however.
