Drawing dividends from company that isn't invoicing

[jamesbrown]

There is nothing to stop any government changing plans already in place. It is available to them to announce immediate changes from the date of the announcement. They could introduce a higher 25/26 ER CGT charge, could increase of reduce the April 2026 18% ER CGT charge. There is nothing to stop any government doing these things.

It is as likely as it is unlikely for this to happen, due to the need to finance various departments but, mainly, the needed increase in military spending thanks to Russia being crazy.

That is blindingly obvious, in general terms, but you seem to misunderstand the Parliamentary process and likely market/broader reaction to (especially emergency) fiscal changes. A budget requires a budget resolution at minimum. An emergency budget never looks great outside of the first few months of a new Parliament. Also, a budget requires 10 weeks notice, minimum, if you want OBR forecasts and, outside an absolute emergency, skipping those is, er, probably not a great idea given the recent history . The next fiscal event (budget) is in October. Changes to tax aren't going to happen before then. Even if they announced a further increase in CGT in October, which doesn't look especially likely, it is even less likely to be implemented before 6 April 2026, which is what you suggested.

[agentzero]

There is nothing to stop any government changing plans already in place. It is available to them to announce immediate changes from the date of the announcement. They could introduce a higher 25/26 ER CGT charge, could increase of reduce the April 2026 18% ER CGT charge. There is nothing to stop any government doing these things.

It is as likely as it is unlikely for this to happen, due to the need to finance various departments but, mainly, the needed increase in military spending thanks to Russia being crazy.

[jamesbrown]

ER is no longer 10%. It's 14% now. 18% after April 2026. Given the warnings of tax changes in the autumn budget it's likely to go up far more and sooner. Keep this in mind. They are likely to make it 18% or higher sooner.

It isn't likely to go up sooner. It may go up further, after April 2026.

[agentzero]

The only (current) reason is I pick up a handful of days consultancy and if that continues Ltd gives me a vehicle for that, plus I was thinking if I paid out in dividends over a few years I don't have the ER at 10% (assuming that still exists in the future)

ER is no longer 10%. It's 14% now. 18% after April 2026. Given the warnings of tax changes in the autumn budget it's likely to go up far more and sooner. Keep this in mind. They are likely to make it 18% or higher sooner.

[Andy2022]

basically you cannot use pension in year X+1 to offset corp tax from year x. If the pension is in the same year as the profit you're all good. But not the next year.
Well you can still pay pension but you're going to struggle to get the CT back so what's the point?

Was referring to pension contributions allowances and the potential to carry forward unused allowances from previous years… these would still be an allowable CT deduction for the current year

[jamesbrown]

basically you cannot use pension in year X+1 to offset corp tax from year x. If the pension is in the same year as the profit you're all good. But not the next year.
Well you can still pay pension but you're going to struggle to get the CT back so what's the point?

Not really true (although I note you use mixed language here of "cannot" but simultaneously "can, but a struggle") because pension contributions are not special in this regard, i.e., the normal rules apply with regard to carrying back trading losses or carrying them forward. So your second sentiment of "can, but a hassle" is the correct one. It is definitely a lot easier to keep the contribution to within the turnover of the current year, though, and to not generate a trading loss.

[Lance]

Best time to do it as when the company actually has an income as they're an allowable expense to reduce corporation tax

By making contributions from retained funds you'll make a loss so you should check with your accountant

I nearly closed down my company a few years back and my accountant was happy with me making pension contributions rather than going through BDAR

There are of course limit to how much you can contribute to a pension but you may be able to make use of previous years allowances

basically you cannot use pension in year X+1 to offset corp tax from year x. If the pension is in the same year as the profit you're all good. But not the next year.
Well you can still pay pension but you're going to struggle to get the CT back so what's the point?

[Andy2022]

That is an idea I didn't think of! Could well be part of the option in a couple of years

Best time to do it as when the company actually has an income as they're an allowable expense to reduce corporation tax

By making contributions from retained funds you'll make a loss so you should check with your accountant

I nearly closed down my company a few years back and my accountant was happy with me making pension contributions rather than going through BDAR

There are of course limit to how much you can contribute to a pension but you may be able to make use of previous years allowances

[youngguy]

Or if you’re close to retirement dump the funds into a pension and then draw from it

That is an idea I didn't think of! Could well be part of the option in a couple of years

[Andy2022]

Why use Dividends - if you are going to be inside for a while (24+ months) just close the company down via MVL..

Or if you’re close to retirement dump the funds into a pension and then draw from it

[youngguy]

Why use Dividends - if you are going to be inside for a while (24+ months) just close the company down via MVL..

The only (current) reason is I pick up a handful of days consultancy and if that continues Ltd gives me a vehicle for that, plus I was thinking if I paid out in dividends over a few years I don't have the ER at 10% (assuming that still exists in the future)

[eek]

Why use Dividends - if you are going to be inside for a while (24+ months) just close the company down via MVL..

[NotAllThere]

One of the whole points of retaining profits in your company is to be able to take dividends when you want.

Your colleague doesn't know what they're talking about.

[malvolio]

Dividends are paid out of net profits.

Since you must have earned something to have a profit to pay them from, the fact that you have little or no current income is totally irrelevant.

[youngguy]

I'm not at retirement yet, but one of the things I am starting to look at is how I might bridge the gap between stopping working and pension age.

I have a ltd company which is fully functioning and has done very small bits of work (few days a year) but my current main gig is an inside contract which is via an umbrella.

I have decent retained profit in the ltd, so was thinking about stopping work a few yrs early and living off dividends rather than close the company . A colleague said this is not allowable since the company won't have any income to speak of.

Is that the case? I can't find any such rule on Gov.uk and the retained profit was obviously as a result of previous years income minus expenses and taxes.

Id ask my accountant but they are just on a retainer at the moment and doing the bare minimum :0)