Case Study: £150,000 Company Profit

April 6, 2025 • 8 min read

With £150,000 of profit, you are a "High Earner". You face the triple threat:

Additional Rate Tax: 45% (Salary) or 39.35% (Dividend).
Loss of Personal Allowance: Reduced to £0.
Corporation Tax: Deep in the Marginal Relief band (26.5% effective).

The "Do Nothing" Disaster

If you simply withdraw everything:

Corp Tax: ~£35,000 (roughly).
Personal Income: ~£115,000.
Tax Trap: You lose most of your Personal Allowance.
Effective Tax Rate: Over 50% combined.

Strategy: The £100k Ceiling

The "Goldilocks" zone for high earners is keeping Adjusted Net Income at exactly £100,000. Why?

You keep your full Personal Allowance (£12,570).
You avoid the 60% Tax Trap.
You avoid the 45% Additional Rate.

How to achieve this with £150k Profit?

Step 1: Salary Take £12,570.

Step 2: Dividends Take £87,430.

This brings total income to £100,000.
You pay Higher Rate tax (33.75%), but you keep your Personal Allowance.

Step 3: The Surplus After paying Salary and Dividends, your company still has profit left.

Gross: £150,000.
Salary Cost: -£13,700.
Dividends: -£87,430.
Corporation Tax: Paid on the profit.
Surplus: ~£20,000 - £30,000 cash remains in the bank.

What to do with the surplus?

Pension: Dump it into a SIPP (up to £60k annual allowance). This wipes out Corp Tax on that chunk.
Electric Vehicle: Lease a Porsche Taycan or Tesla through the company. Benefit in Kind is tiny (2%), but the lease cost offsets Corporation Tax.
Money Boxing: Leave it for a future year (e.g., a sabbatical year where you take no salary, or for a future detailed liquidation).

The Spouse Strategy (Advanced)

If you have a spouse, split the equity (e.g., 50/50 shares).

Profit: £150,000.
Allocated to You: £75,000.
Allocated to Spouse: £75,000.
Result: BOTH of you are Basic/Higher Rate taxpayers. Neither of you hits the £100k trap. The tax savings are massive (potentially £20k+ per year).

Warning: "Settlements legislation" applies. The transfer of shares must be an outright gift with no strings attached, and ideally done when the company is structured.

Summary