Claiming working/child/tax credits/other benefits by paying small salary/dividends?

[Greg@CapitalCity]

Do we know what the tax rate for this would be? Same as Capital Gains?

Yes, same rules apply. The usual capital gains tax rates, or if the qualifying conditions have been met, then the Entrepreneurs’ Relief capital gains rate of 10%.

[Support Monkey]

Maybe, but you do have to declare your dividends as earnings on the annual review, so really, what is the point in keeping your income so low?

you have to declare any dividends taken, the less dividend you take the lower your earnings the more family tax credit

[Support Monkey]

Don't forget you still have to take all this money you have been 'hiding' in your LTD at some point so are going to get stung for tax at some point. If you let it grow too big and start breaking the next tax thresholds you could be looking at paying top rate tax because you didn't spread the payments better earlier on.

You are not looking at the bigger picture.

True but you can only claim FTC until the kids leave education so after this point you can revert back to taking as much money in dividends as you like

[Support Monkey]

Thanks for your replies. I worked out that on a total income of £15k (made up of salary and dividends) our household would be entitled to the following yearly benefits;

child benefit: £1762
child tax credits; £15907 (working and child)
council tax benefit: £1080
housing benefit: £11,313
plus free school meals, prescriptions etc.

Approx £30k

So add that to the £15k

Total income of £45k most made up of benefits

Your getting ahead of yourself, child tax credit is one thing as there is nothing on the form about declairing profits but if you claim housing there is a much more stringent test they will almost certainly look into your earnings I would be very surprised if you can claim housing benefit as a LTD co director with money in the company

[Mr.Whippy]

Yes, same rules apply. The usual capital gains tax rates, or if the qualifying conditions have been met, then the Entrepreneurs’ Relief capital gains rate of 10%.

What are the qualifying conditions for a rate of 10%?

[Greg@CapitalCity]

What are the qualifying conditions for a rate of 10%?

Hi Mr.Whippy,

1. Must be a trading company (usually the case for your normal contractor ltd company);
2. You must be a director;
3. As a personal service company, you must hold at least 5% of the ordinary share capital and in which you are able to exercise at least 5% of the voting rights by virtue of that holding;

These conditions must be satisfied for at least one year prior to the company ceasing to trade.

[Mr.Whippy]

Hi Mr.Whippy,

1. Must be a trading company (usually the case for your normal contractor ltd company);
2. You must be a director;
3. As a personal service company, you must hold at least 5% of the ordinary share capital and in which you are able to exercise at least 5% of the voting rights by virtue of that holding;

These conditions must be satisfied for at least one year prior to the company ceasing to trade.

Great, thanks for that

[mudskipper]

I did wonder about this with daughter off to uni this year. Decided my conscience wouldn't let me, but if others want to go for it, good luck to them!

[Scrag Meister]

I did wonder about this with daughter off to uni this year. Decided my conscience wouldn't let me, but if others want to go for it, good luck to them!

No good luck wishes here.

People like this are as bad as those that won't work cos they are lazy.

Milking an already stressed system even though they are well funded.

My conscience wouldn't let me be such a drain on the public purse either.

For me to go and claim all these items I would have to be in a genuine situation where I knew I actually deserved and needed it rather than sponging by manipulating your otherwise healthy company figures.

Gotta be a sockie troll? Right? Doh!

[kingcook]

Interesting thread.

I wouldn't do the low wage + big benefits thing while i were in a current contract with a client, but it's something to consider if i ever faced long periods on the bench.