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Originally Posted by 3rdknight
Hi all, fascinating thread ... so much so that it's prompted me to add my inaugural reply!
Dragging this thread screaming and kicking back on to topic(ish) ... somewhere back along there was brief discussion about paying minimal salaries and the rest in dividends up to higher rate tax thresholds, keeping the residue in the company.
I'm just about to start contracting and getting myself organised as we speak. I seem to recall having seen some discussion in the past about monthly dividends attracting unwanted attention from HMRC ... is this true? Is it generally considered better practice to pay them quarterly?
I suffer from an exhorbitantly oppressive mortgage payment, a wife and two kids - not sure they'd appreciate me dropping to minimum wage!  |
Personally, I feel that paying yourself monthly dividends could draw the accusation from HMRC that the payment is salary and therefore they are due NI (employer's and employee's) on the payments - especially if your dividends are the same every month.
However, I have seen posts on here from a respected accountant (using their own name and reputation) stating that there is nothing wrong with monthly dividends provided that they are paid out of profits. So you probably don't want to take my advice but ask a professional. Do actually ask a professional though rather than rely on messages on here!
I did not receive any salary or dividends from my company for the first six months of contracting , however I had made contingency plans for that eventuality before I took the plunge.