HRT dividend and pay off mortgage

[WordIsBond]

I am in a similar position but not without so much sitting in the company bank account. I have about £25k surplus this year after taking divis and salary to the higher tax threshold. I am thinking a lot simpler in order not to cloud my head with too many thoughts. I either put into the pension or I take out divis and pay the higher rate tax.

If the surplus is only £25K, why not just leave some of it in the company, rather than pay HRT? That way, if you end up with some bench time, you still have funds you can pay yourself next year at a lower rate of tax.

Pension, sure, if you want to and it makes sense. But if your reserve is less than six month's income, wouldn't it be nice, if you end up on the bench, to be able to keep paying yourself, and to not go into higher rate tax to do it?

My view is to take everything out that you can take out with tax efficiency. Anything below HRT is tax efficient. So are pension contributions. But HRT is not tax efficient, and bringing it forward to this year only makes sense if it is likely to be HRT in future. With a reserve of only £25K, I wouldn't be drawing it out unless somehow you know you are not going to be on the bench until you've got more reserve, and also know you aren't going to fall ill and be unable to work.

If you were sitting on £250K, and wanted to take some out before the higher taxes kick in, maybe, if you are sure you are going to be paying HRT sometime in the next few years anyway. But £25K? Only if you really want to get at the money because you have something you need or really want to do.