30 September 2026
As the busy summer season comes to an end, many tourism and hospitality businesses across Pembrokeshire take the opportunity to review their financial performance and plan for the year ahead. Whether you operate a holiday cottage business, hotel, guest house, restaurant, activity centre, caravan park or visitor attraction, ensuring your remuneration is structured tax efficiently can help you retain more of your profits while remaining fully compliant with HMRC requirements. For owner-managed businesses, deciding how to extract funds from the business is an important aspect of financial planning. By considering the right balance of salary, dividends, pension contributions and benefits, you can often reduce your overall tax burden and improve long-term financial security.
Why Remuneration Planning Matters
Many tourism businesses experience significant fluctuations in income throughout the year with the majority of profits generated during the spring and summer months. This seasonal pattern makes remuneration planning particularly important.
Rather than simply withdrawing funds as they become available, a structured approach can help:
- Reduce Income Tax and National Insurance liabilities.
- Improve cash flow management during quieter winter months.
- Build retirement savings through tax-efficient pension contributions.
- Make use of available allowances and reliefs.
- Ensure business owners are rewarded in the most efficient way possible.
Key Tax-Efficient Remuneration Strategies
Salary and Dividends
For directors who operate through a limited company, a combination of salary and dividends often remains one of the most tax-efficient approaches.
A modest salary may preserve entitlement to certain state benefits and pension credits, while dividends can provide flexibility and may attract lower tax rates than employment income. The optimum balance will depend on your wider circumstances and other sources of income and with the increase in dividend tax rates, salary is becoming more tax efficient.
Pension Contributions
Following a successful summer season, making pension contributions before your year end can be a valuable planning tool.
Contributions paid by the company can:
- Reduce the company's taxable profits.
- Help build retirement funds.
- Provide tax efficient extraction of business profits.
This can be particularly attractive for owner-managed tourism businesses that have generated surplus cash during the peak season.
Benefits in Kind
Certain benefits can be provided tax-efficiently through your business, including:
- Health benefits
- Mobile phones used for business purposes.
- Staff training and professional development.
- Electric vehicle schemes where appropriate.
- Cycle-to-work arrangements.
Selecting the right benefits can provide value to both directors and employees whilst managing tax liabilities effectively.
Claiming Business Expenses
Tourism businesses often incur a wide range of operational costs and ensuring all allowable business expenses are identified and claimed can reduce taxable profits.
Examples may include:
- Marketing and advertising costs.
- Website and booking platform fees.
- Professional subscriptions.
- Business mileage and travel expenses.
- Staff training costs.
Maintaining accurate records throughout the year is essential.
Planning Ahead for 2027
October is often an ideal time to review remuneration arrangements before the end of the tax year planning cycle begins.
Questions worth considering include:
- Has the business had a stronger year than expected?
- Are pension contributions being maximised?
- Is the current salary and dividend mix still appropriate?
- Are family members involved in the business in a tax efficient manner?
- Are there opportunities to make use of available allowances before they are lost?
A proactive review can often identify opportunities that may not be available if planning is left until the end of the tax year.
Final Thoughts
After another busy tourism season, now is an excellent opportunity to review how you are extracting profits from your business. Small adjustments to remuneration arrangements can often produce meaningful tax savings whilst supporting long-term financial goals.
Every business is different, and the most effective strategy will depend on your specific circumstances, business structure and future plans. Seeking professional advice can help ensure you are making the most of the opportunities available while remaining fully compliant with current tax legislation.
If you would like to discuss remuneration planning or wider tax planning for your tourism business, our specialist team would be happy to help.
