Dividends..how much and implications?

[EchoSierra]

My accountant suggested no salary, just divs, anyone else is just paying themselves divs?

Yeah, I've heard that as well but its not very tax efficient. You've got a Personal Allowance of £6,475 in the 09/10 tax year which means you pay zero tax on that so why would you have that as a div and pay 21% CT on it?

As I said, I've heard of people doing this, but don't understand the logic behind it... Yes, there is NI on £6475 but its 83.60 and Employers NI is £97.28 so much less than £1359.75 CT you'd pay on £6475.

[ASB]

My accountant suggested no salary, just divs, anyone else is just paying themselves divs?

Unless you have salary from somewhere else that advice is, in my view, cack because:-

- you won't get a years pension credit
- you will pay about 1200 more in tax.

[ASB]

Yeah, I've heard that as well but its not very tax efficient. You've got a Personal Allowance of £6,475 in the 09/10 tax year which means you pay zero tax on that so why would you have that as a div and pay 21% CT on it?

As I said, I've heard of people doing this, but don't understand the logic behind it... Yes, there is NI on £6475 but its 83.60 and Employers NI is £97.28 so much less than £1359.75 CT you'd pay on £6475.

You can avoid the NI althougther and get a pension credit by paying between the lower earnhigs limit and the primary threshold. I can't be bothered to work out where the crossover point is for the absolute most tax efficient but I'd be surprised if it was more then the LEL.

[zamzummim]

Unless you have salary from somewhere else that advice is, in my view, cack because:-

- you won't get a years pension credit
- you will pay about 1200 more in tax.

Yes I had extra income / salary from somehwere else.

[ASB]

Yes I had extra income / salary from somehwere else.

Then yes, in those circumstance dividends only in the most tax efficient way.

[Mustang]

What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.

[ASB]

What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.

It may well make you more likely to be investigated, but there not a damn thing HMRC can do about it - though when I had my investigation the inspector wanted to make absolutely sure all the paperwork for the divis was in order.

[shoes]

What no one seems to take into account in this thread is whether you are drawing enough salary to meet your outgoings. If you are then fine. If you are not, and need your divis to live on, then thats a big flag to HMRC IMHO.

But, as previously suggested, a 6k salary and the rest divis says to the IR come get it big boy do ya feel lucky punk. Or in other words, suggests you are confident of your ir35 status and so are not rich pickings for IR.

And who is actually drawing enough in salary to meet their outgoings? The people paying national min wage or just over certainly aren't, so what's the point of paying that extra tax? To an investigator that might say 'im not all that confident of my position so im just playing it safe', indicating there might be some in ir35 contracts there. And to those paying themselves 50k salary or whatever, you might as well go brolly in most cases.

All or nothing, 6k and divis, up yours hector.