My accountant is a cautious fellow which is just the way I like him, most of the time, mHowever I do sometimes feel as though he suspects me of wearing a wire or having my office bugged, because I cannot get a straight answer from him on a fairly fundamental question and believe me, I've tried.
Basically, the question that turns him green is this - why do I have to go out of my way to make dividends appear as unlike a salary as possible? my ltd company is paying me a low salary (£20,000) plus a few quid for the wife, and I am topping that up with dividends of around £20,000 every few months depending on how profits are going. Surely the revenue doesn't expect me to live entirely on the low salary and spend the dividends exclusively on caviar and champagne?
To put this in context, I recently had to query why the Revenue had issued me with a 0TX tax code and discovered it was because I earned more than £100k last year so they projected I'd presumably be earning that again this year and wiped my personal allowance accordingly. However last year I was an employee of a large corporate. This year I am employed by my small ltd, hence the 80k drop in annual salary. My accountant is hyperventilating at the thought of the taxman knowing I've taken such a large drop. But I say again, why does it matter? If I'm allowed to take dividends from profit, why does it matter that I use it for living expenses in the same way I previously used my salary?
Basically, the question that turns him green is this - why do I have to go out of my way to make dividends appear as unlike a salary as possible? my ltd company is paying me a low salary (£20,000) plus a few quid for the wife, and I am topping that up with dividends of around £20,000 every few months depending on how profits are going. Surely the revenue doesn't expect me to live entirely on the low salary and spend the dividends exclusively on caviar and champagne?
To put this in context, I recently had to query why the Revenue had issued me with a 0TX tax code and discovered it was because I earned more than £100k last year so they projected I'd presumably be earning that again this year and wiped my personal allowance accordingly. However last year I was an employee of a large corporate. This year I am employed by my small ltd, hence the 80k drop in annual salary. My accountant is hyperventilating at the thought of the taxman knowing I've taken such a large drop. But I say again, why does it matter? If I'm allowed to take dividends from profit, why does it matter that I use it for living expenses in the same way I previously used my salary?
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