Dividends and salary

[psychocandy]

Just a thought but we started paying monthly dividends as couldn't afford to do otherwise. Is that maybe what the accountant was concerned about in the event of an investigation? Why does it matter when the divs are taken as long as we can demonstrate that there was distributable profit in the account at the time (ie set aside in separate account for VAT and corp tax liabilities)?

Anyone? Think this might me the crux of the matter

Another myth. Monthly dividends make no difference at all.

You could daily dividends if you wanted. No concern of HMRC how your business is run as long as its run legally and, as you say, there profit to be taken.

[psychocandy]

I would argue from personal experience you don't. I would rather a mail an accountant with 11000 contractors on the book than go talk face to face to someone who doesn't know what they are doing. I have been with SJD for 6 years and never met a single person but they reply to mails on the same day and I very rarely call and can't speak to my accountant. The thing is they are good enough to not really need me to mail or call them. I remember from previous posts that Nixon Williams, InTouch etc have exactly the same feedback. Knowledge > locality in my book.

Paying tax needlessly on £12.5k is a good reason not to go with a local setup.

Each to his own at the end of the day but after this mess I would re-look at my options.

WHS. Never spoke to my account manager at NW. I email and he replies same day which is good enough for me.

[psychocandy]

Based on a company turnover of about £100k or £440/day, I'd estimate that you are paying about £10,000/year in tax that you could avoid. Specifically:

1. Don't take more than £7488 (£624/month) salary.
2. If your wife has no other income then you should be paying her £7488 and income splitting with her by issuing her with shares.
3. Salary and dividends of around £70k combined will make you a higher rate tax payer so you have a nasty shock on the way when you do your self assessment.

Check out this calculator to verify what I've written above.

However, if you are happy to make a starbucks style "voluntary" donation to the exchequer then good on you! Each to their own.

No. Pay exactly £7488.

Not sure about paying the Mrs £7488. Got to be able to justify it remember? She can't do the books for an hour a month and get £624 for it.

Make her a shareholder of course and income split.

Keep both of your income below £42K to save even more tax if you can. e.g. Pay yourself £7K salary, £35K dividends, her £35K dividends.

Theoretically, you could massage the share percentage to give her more (to use up her £7K not used) but its probably not a good idea. Stick with 50/50 or HMRC might kick off if its 55/45 (or you keep changing it to suit yourself).

[psychocandy]

Monthly dividends should be avoided. Even though the tax man will only see the annualised figure from your company accounts as there is no need in them to show the frequency of distribution. However, should you be subject to an investigation and there are monthly dividend payments as evideneced by your dividend vouchers and bank statements, then the taxman will use the starting point of these are disguised salary payments, now prove otherwise. Don't forget, in the eyes of the taxman, you are guilty until you can prove you are innocent.

Evidence of this? Or just opinion?

Just realised I've agreed with 2 things NLUK has said on this thread as well.... ;-(