Many commentators suggest the use of capital transactions as a tax-efficient method of extracting profits.
Clearly, capital transactions are not generally appropriate methods for withdrawing profit on a regular basis as they involve an element of finality. However, they may be appropriate on certain occasions, such as on the retirement of the business proprietor.
Tax implications
A potential advantage of such a transaction is that gains are taxed at a flat rate of 18% or 24% from 30 October 2024 (10% or 20% prior to this date) depending on whether the total taxable income of the individual exceeds the income tax basic rate1. These are often better than the equivalent rates for income tax (on, for example, a bonus).
Method of share disposal
Disposing of shares generally involves one of the following:
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(a)ÌýÌýÌýÌý sale
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(b)ÌýÌýÌýÌý liquidation; or
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(c)ÌýÌýÌýÌý company repurchase of own shares
Clearly, the first of these can give a capital gain which might be relieved by offset against other capital losses; the latter
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Web page updated on 17 Mar 2025 17:34