Dividend Income Splitting

[Gary10]

Hi All

I'm in my second month of working as a limited company and doing the minimum salary/dividends method of withdrawing money from the company.

So far I've paid for an annual train ticket, which means that I've had just enough income to the company left to pay the right amount for my salary and dividend, but as from next month I will have enough to start paying dividends to my wife.

She works, so I will need to pay her a different amount of dividends. At the minute I only have the one share issued, so I'm looking into what is the best option;

A) Issue a single different class of share to her and declare 2 different amounts of dividends each month.
B) Issue 99 more shares and split them appropriately, with changes related to any rises in pay for her.

Obviously A seems the easier option, but does anyone know if there are any issues inherent with either solution?
Her dividend will be going into a seperate account for her and won't be put towards any bills or mortgage to avoid any accusations of the money really being for me.

[Craig@Clarity]

I'd consider issuing shares of the same class and type rather than A,B,C shares etc to your wife. If different class of shares are issued, then you would be exposing yourself to challenge by HMRC for income splitting.

[Gary10]

I'd consider issuing shares of the same class and type rather than A,B,C shares etc to your wife. If different class of shares are issued, then you would be exposing yourself to challenge by HMRC for income splitting.

Cheers for the advice.

Is there any issues/costs in issuing 99 more shares and then giving her the appropriate amount?

Also, is there any further issues in her giving me some back if she gets a pay rise?

[northernladuk]

Also do a search on here as Income Splitting has been discussed in detail. I believe it is important how you distribute the shares to keep you clean. I don't think you can just give them away without looking like you are avoiding tax. Giving your partner free shares so you can withdraw more money without paying tax on it doesn't seem right. She has to be seen to be investing in the company to reap the rewards surely.

I dunno the rules to be honest but I do remember this being mentioned in other threads so maybe worth investigation via search or an accountant

[Craig@Clarity]

Cheers for the advice.

Is there any issues/costs in issuing 99 more shares and then giving her the appropriate amount?

Also, is there any further issues in her giving me some back if she gets a pay rise?

There is no issue with allocating more shares from the company to existing shareholders and new shareholders. You could transfer existing shares from your wife to you further down the line, but it would be better if you tried to forecast this and get it right from the start. What I would suggest trying to avoid is transfers of shares between the both of you whenever it suits and frequently.