I'm currently working through my own limited company on a contract inside IR35.
I'm a higher-rate taxpayer and I'm already maxing out my pension contributions. I'm getting close to retiring and in a few years I plan to be retired or semi-retired; either way I will definitely be a lower-rate taxpayer.
Even though I'm inside IR35 the company still makes a small profit (from the 5% expense allowance, which exceeds the actual expenses) so I'm paying myself a small dividend every year at the moment. I am thinking about changing the company dividend distribution policy to not pay these dividends and retain the profits within the company. That way I can pay myself the accumulated profits (which will be in the low tens of thousands at most) as a dividend in a few years when I'm a lower-rate taxpayer. As I understand it, that will save me 32.5% tax on the dividends in return for waiting a few years to get my hands on the money.
Is my reasoning correct, and there is a potential tax saving to be had here?
Am I right in thinking that being inside IR35 just forces most of the company earnings to be treated as salary, it doesn't impose any additional restrictions on what can be done with the small amount left over?
Is this legal? Even if it is, are HMRC likely to get upset about me doing this?