Prudential has launched a free online tool to help advisers develop a suitable framework for business-owner clients seeking to extract profits from their companies as part of an overall retirement strategy.
The firm’s Extracting Company Profit tool allows users to review and change a business owner’s current remuneration structure to see how this would affect factors such as income after taxation, the retained business profit, pension contributions and the tax payable to HMRC.
Pension contributions will become a vital instrument in minimising the effect of changes to dividend tax which are due to come into effect in April next year, according to Prudential head of technical Les Cameron.
He said: “The change to dividend taxation coming into effect next April will hit small business owners hard, especially those who are currently using the popular strategy of relying heavily on shareholder dividends from their business to supplement a small salary. The need for advice has never been greater.
“As a result many business owners will want to rethink their current remuneration strategy which also creates the perfect opportunity for financial advisers and accountants to help them look at how they will fund their future income needs too.”
Paul Lindfield, director of wealth management at Manchester-based Sedulo, said: “The Extracting Company Profit tool seems like a sales gimmick to me. It does not really offer anything new to what we do in our day-to-day roles.”