Businesses in the tech sector are not just creating and developing technological innovations - they have rewritten the rulebook on how businesses are structured as well. Fast growing, with a clear exit strategy from the outset, many of these businesses start their life as an idea. The experience of professionals is to help turn the idea into a business with a path to market and clear KPIs.
The challenge for many tech entrepreneurs is to monetise their idea and see it as a business from the earliest possible moment
We work closely with our tech clients to provide the advice and support necessary but more than that, consider:
- Full capabilities to prepare, submit and defend R&D claims for enhanced tax relief
- Guidance through the Patent Box process of further tax relief
- Advice regarding available funding and grants
- A highly experienced Corporate Finance Team for when the time is right to sell
- Recruitment and development of talent with advice from our HR Consultancy team
- Intellectual Property - protect the value of your idea
Different because you are
We pride ourselves in providing individually tailored services to our clients. Whatever your aspirations and priorities in business and life, we will be by your side with expert advice from local specialists. It is because your needs are unique, that the solutions we provide are distinct and personalised to you.
Our specialist tech sector team is able to provide quality advice to enable your big tech idea to become a real business success. Get in touch to learn more about what we can do to help you realise the potential of your idea.
Should I pay myself a salary or dividends?
If you operate a limited company, are a shareholder and have profit reserves, you could pay a dividend to shareholders. If you are doing this for tax planning purposes be careful of how all shareholders are treated, especially if they are family members and not actually working in the business.
Anyone receiving dividends can utilise the dividend allowance which means the first £2,000 received is taxed at 0%. Over £2,000 the basic rate tax charge on dividends is currently 7.5% with higher and additional rates for higher earners. Salaries incur PAYE and Employees National Insurance contributions. Employers also pay Employers National Insurance contributions. Whilst companies will receive corporation tax relief on these costs (which would not be the case for dividends) the comparative cost can often be higher than the dividend route.
Whether or not it will be beneficial for you to pay higher dividends and lower salaries will be a matter for review. There is no simple rule which will apply to all and with higher taxes on dividends the decision is much more negligible than it has been in the past. Much will depend on your other income, role in the business and corporate structure of your company.
Taking a step back though, if you are starting in business you may want to review your choice of business structure first. Consider the cost of operating a limited company and the benefits of limited liability. See how these balance with potential tax advantages and make an informed decision. We can help with these discussions, allowing you to enter business with your eyes open.
Book a meeting with one of our specialists to discuss how best to structure your business and remuneration strategy.
Should I set up my business as a limited company?
When setting up in business, the structure you adopt is important. Limited companies are common but add a level of compliance to affairs which many small business owners can do without at the start of their business journey. In basic terms there are three things to consider and discuss with your accountant or adviser:
1. Cost - A limited company is a separate legal entity which has to prepare accounts and file a corporation tax return each year. As a sole trader your only compliance obligation is to prepare and file a personal tax return each year. As such, administering a limited company is likely to add cost to your overheads.
2. Tax - Limited companies pay tax on profits at 19%, extraction of profit can be done by salary, dividend or a mix. With the correct strategy there can be savings compared to a sole trader structure where tax and national insurance are payable on profits.
3. Risk - Limited companies provide a layer of protection as they are a separate legal entity. Whilst there are provisions to target Directors who behave recklessly, generally speaking the 'veil of incorporation' can offer legal protection to Director / Shareholders compared to unincorporated business structures.
Whether to incorporate will be a decision based on a balance of these three factors. Speak to one of our experts to discuss the best solution for you.