How to Use Your Business Profits Wisely (and Avoid Paying Extra Tax) 

Business owner in Ireland? If you’ve got profits sitting in your business account, it’s a great time to make some smart moves to benefit both you and your employees while keeping your tax bill as low as possible. Here’s how you can make the most of your business profits in tax-friendly ways: 

Secure Your Income with Income Protection

For most of us, salary is our main source of income, so protecting it is essential. Income protection insurance is a great way to do this while also lowering your tax bill, since it’s tax-deductible. This insurance kicks in if illness or injury keeps you from working, making sure you (or your employees) still get paid. You can set this up for yourself or offer it as a perk to your team, showing you care about their well-being. 

Set Up Life Insurance as a Death-in-Service Benefit

Another smart way to use business profits is through life insurance, which can be offered as a death-in-service benefit. This type of insurance pays a lump sum to your family or the families of your employees if the worst happens. Not only does it provide important protection, but it also makes your business a more appealing place to work. Plus, the policy cost is tax-deductible, which benefits everyone. 

Safeguard Partnerships with Shareholder or Partnership Protection

If you have business partners or shareholders, planning for the unexpected is essential. A shareholder or partnership protection policy ensures the business can continue smoothly if one of you becomes unable to work or passes away. This type of policy allows the remaining partners to buy out the share of the business, reducing disruption and securing everyone’s financial interests. 

Plan for Retirement with PRSAs and Pensions

Using your business profits to fund a pension plan is one of the best ways to enjoy tax relief. You can contribute to a Personal Retirement Savings Account (PRSA) or a pension scheme for yourself or your employees. Not only do you get tax relief (at either 20% or 40% based on your income), but contributions from your company are also tax-deductible. Over time, your pension grows, and you can take out a lump sum tax-free upon retirement. 

Take Advantage of Tax Breaks When Selling Your Business

Planning to sell your business down the road? There are two big tax relief options you’ll want to know: Retirement Relief and Entrepreneur Relief. 

• Retirement Relief This is a relief on Capital Gains Tax (CGT) when disposing of any part of your business or farming assets. (if you meet certain conditions). 

• Entrepreneur Relief allows you to sell qualifying business assets with a reduced capital gains tax rate of just 10% (instead of 33%) which applies to a lifetime limit to €1 million. 

These reliefs are great tools to help you hold on to more of the money you’ve worked so hard for. 

Book a Consultation 

If you’re ready to explore these strategies, we’re here to help. From income protection and retirement savings to planning for a future sale, we can guide you through the best tax-efficient options. 

With these strategies in place, you’ll be setting yourself, your business, and your team up for long-term security and financial success.