You’re short of cash but if you use the traditional methods to take more money out of your company you’ll pay higher rate taxes. Is there another way to extract profits without paying income tax or NI?
Paying yourself
Usually, however you choose to take money from your company – be it salary, benefits or dividends – there will be tax and possibly NI contributions to pay. Once these options are exhausted the next best idea is generally to borrow money from your company. The trouble is that you’ll eventually have to pay it back or else face a corporation tax charge of 35.75%.
Have a clear out
However, it is possible to take cash from a company without it counting as taxable income or a loan. You can sell assets to your company for cash. Items you want to keep but have no use for work best, e.g. jewellery or antiques. You could kill two birds with one stone by selling items you’re getting rid of that would benefit the company, such as a desk or TV for the staff room.
The company can claim tax relief on items it will use in its trade.
Transfer assets which you won’t want to use or need at all, otherwise a benefit in kind will arise.
Market value only
You’re connected with your company so any transaction between you and it is deemed to take place at market value for tax purposes. For this plan to work you must therefore do some research on the market value of the items you’re selling and take account of each asset’s condition and age.
Example. Sue owns several gold necklaces which she doesn’t wear anymore. She takes them to a jeweller who offers to buy them for £1,000 based on the current price of gold. Sue can sell the necklaces to her company for £1,000; anything above this amount would be taxable income.
Research the appropriate market value by looking online at sites such as eBay and Vinted and keep evidence of it. Prepare an invoice so that you have evidence of the sale.
Capital gains
The sale could give rise to a capital gains tax (CGT) charge. However, this is only charged on any increase in value since you obtained the item, to the extent it exceeds your annual CGT exemption (£3,000 for 2026/27). Tangible items such as jewellery and furniture are exempt from CGT if they are worth less than £6,000, under the chattels exemption, giving you several bites of the tax-free cherry.
Have your cake and eat it?
By using this method, you can make some money on items that are gathering dust and you get to keep them. Just remember that they legally belong to the company and you will probably have to pay tax (or the market value) to get them back out of the company’s ownership.
For valuable or sentimental items play it safe by drawing up a sale agreement that gives you first refusal to buy back the assets.
