This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.

Company reserves: Storing up trouble?

Shared from Tax Insider: Company reserves: Storing up trouble?
By Alan Pink, July 2021

Alan Pink looks at the potential impact of allowing reserves to build up in limited companies. 

Many businesses are sitting on a kind of ticking time bomb in relation to tax. This is in the situation where profit and loss reserves build up because they are not being regularly cleared out by way of dividends paid to the shareholders.  

The reason this is such a big issue is basically because of the big difference between the tax rates that apply to profits that are distributed from a company on the one hand, and the profits that are kept within the company on the other.  

Even with the changes promised us from 2023, the top rate of corporation tax will be 25%, with profits of less than £250,000 being taxed at rates down to a minimum of 19%. So, it seems to make obvious sense to run a business activity through a limited company, when you compare the rates

This is one of our 2098 Premium articles

To see this article in full and unlock access to our complete library of 2098 articles click 'subscribe & unlock' below:

Subscriptions include a 14 day free trial
+ money back satisfaction guarantee

Begin your tax saving journey today

Each month our tax experts reveal FREE tax strategies to help minimise your taxes.

To get Tax Insider tips and updates delivered to your inbox every month simply enter your name and email address below:

Thank you
Thank you for signing up to hear from us!