Continue to draw salary/dividends after stopping work??

**chopper** · 2 February 2017, 20:08

Two options (well more than two, but these two are obvious).

1) Wind the business up using the MVL process, this involves paying someone like Members Voluntary Liquidation | MVL Online® some money to wind the business up, then you can pay yourself the remainder as a distribution, paying 10% capital gains tax. (You should quality for entrepreneurs relief).

2) Don't wind the business up, pay yourself £5000 a year tax free dividends for the next 9-10 years. You will incur some costs in keeping the business alive for those 9-10 years, of course. You should be able to find a friendly accountant who will do the statutory filing stuff cheap enough if all it is doing is dishing out its capital in dividends every year without actually trading, who wont charge you too much for this. (Or do it yourself, of course).

**Alan @ BroomeAffinity** · 2 February 2017, 20:16

I can see that there might be an argument against paying a salary if there's no work being done but I'd suggest as a director you're entitled to it. Then there's the dividend.

That said, if you're retiring, or old enough to do so, paying into a pension which would instantly vest might be a better option.

**dazbear** · 2 February 2017, 22:33

Not old enough to retire - just having a break and then want to do something totally different.

So people don't see an issue with taking a dividend each year until the coffers are empty? I had heard that HMRC would take issue and class it as a CiC???

**northernladuk** · 2 February 2017, 22:35

There is not chance that something different might involve invoicing someone from time to time?

**Alan @ BroomeAffinity** · 2 February 2017, 22:59

Could be classed as a close investment holding company, but there'll be no profits to tax so the tax rate is irrelevant, no?

**Maslins** · 3 February 2017, 09:27

I'd agree with chopper (disclosure I'm involved in MVL Online).

A liquidation would be a nice clean way to get rid of the company now, and get the funds into your hands relatively tax efficiently (probably about £4k tax). The liquidation itself will likely cost a grand or two, and also be aware the tax bill could be much higher if you were to return to a similar business within 2 years.

Or the drip feed option is there. If you stick to just dividends, you will have a decade before it'll be empty. Firstly, that's quite a lot of accountancy effort and hence costs (or hassle of you DIYing for a long time). Secondly, tax rules will almost certainly change...this could of course work either for or against you. Thirdly, depending upon what else you're doing, the dividends might not be tax free.

If you do go down the drip feed option, I'd recommend discussing with your accountant how you can speed it up. Eg you can likely justify a salary for a year and carry back the loss created by it, getting a bit of CT back, and also helping get the pot into your own hands quicker. Pension contributions are also an option. Also if you have literally no income independent of the company, then you should be able to take quite a bit more than £5k/year in dividend tax free, as you'll have your personal allowance too.

Finally worth mentioning if/when you get below £25k (again assuming current rules stay as they are) you can get CGT treatment with a cheap and cheerful strike off (ie no MVL required).

**dazbear** · 3 February 2017, 09:32

Thanks, I now feel a bit more informed before speaking with the accountant

I would like to keep the company going as I may end up after my 'break' and exploring other avenues that the "grass wasn't greener" after all and decide to pick up where I left off (ha).

Thanks for all of your advice

Continue to draw salary/dividends after stopping work??