Optimizing dividends

[Ardesco]

How the hell do you suvive on that!?

What less than 38K a year (x2)

[Xenophon]

What less than 38K a year (x2)

x2 makes all the difference.

[DaveB]

@pickle:


Ok, but let's say hypotetically my contract finishes Dec this year, and I don't draw from my company account for six month (say because I'm away in Canada skiing for the season).

If I then go to draw from my account in May 2008, are you then saying I can just draw a dividend, without first initiating a wages transaction??

Yes, as long as the money is available in the Co. as profit you can declare dividends as and when you see fit.

[trigger]

Ok thanks DaveB, now I understand.

Its just that when my accountant first told me that "after expenses and wages, everything else is profit"...I thought he meant that for every given dividend transaction, I first had to first initiate a wages and expenses transaction.

Should have really been thinking "outside the box - I didn't realize he meant it was across the whole financial year!

[trigger]

Ok just thought of something else...

Does this mean that I will need to pay myself wages (every month) for the whole twelve months of any given financial year?

For example, given my hypothetical scenario, since I will stop working in December, do I need to keep paying myself wages, every month, until I hit the £5200 threshold?

[mjshrimpton]

Ok just thought of something else...

Does this mean that I will need to pay myself wages (every month) for the whole twelve months of any given financial year?

For example, given my hypothetical scenario, since I will stop working in December, do I need to keep paying myself wages, every month, until I hit the £5200 threshold?

Can you not just leave some postdated cheques to cover the monthly wages until March and ask a kind person to pay them into the bank for you while you are away?

[ASB]

Ok just thought of something else...

Does this mean that I will need to pay myself wages (every month) for the whole twelve months of any given financial year?

For example, given my hypothetical scenario, since I will stop working in December, do I need to keep paying myself wages, every month, until I hit the £5200 threshold?

No.

[trigger]

Can you not just leave some postdated cheques to cover the monthly wages until March and ask a kind person to pay them into the bank for you while you are away?

No, the logistics of paying the wages are not the problem, since I have online banking.

But my question is whether I NEED to pay myself wages over these months (I am not working)?

Is it ok for me to just stop paying myself in DEC-2007...and then, if I want to, draw a dividend in MAY-2008??

[VectraMan]

IIRC, as a director, there's no need to keep paying yourself a regular wage if it suits you not to.

Only snag is that HMRC will be expecting a monthly payment of tax/NI, so you might have to send in some "nil slips" for those months to tell them you're not earning.

[FiveTimes]

No, the logistics of paying the wages are not the problem, since I have online banking.

But my question is whether I NEED to pay myself wages over these months (I am not working)?

Is it ok for me to just stop paying myself in DEC-2007...and then, if I want to, draw a dividend in MAY-2008??

I don't believe you have to keep paying yourself a wage.

What ever comes out of the account be it dividents/wages/expense payments will all get added up at year end as long as you dont hit ~38k you should be fine with no extra tax.

I work on the basis of a theoretical salary of 500/month + 2500/divis.

The accountant will just work out the divis/wages at the end.