A complex tangle, but I’d appreciate a view.
I’m separated from my wife, but back on the best of terms. She, however, is stuck in the Far East with aged and declining parents. She’s living off the proceeds of a property (her's) sold there. Once this runs out – 2 or 3 years at my guess -- either (a) I’ll return to remitting funds or (b) deaths in the family will leave her free to return to the UK. She's been out of the UK for 5 years.
Back here I’m phasing retirement and, from mid-2018 estimate income: pension (NHS) £35K, stock dividends £37K, part-time salaried post £18K plus variable drawings from a SIPP to total of £100K p.a. On top of this I’m able, if I choose, to generate consulting income of say £30-50K p.a., likely to decline over time. With a diversity of clients, not public sector, this isn't at IR35 risk. The catch is pursuing the consulting income would (a) deposit me right into the trap where personal allowance is withdrawn and (b) would mostly get hit for NI too. The effective tax rate would be 69% on around half of it (60% tax from 100-123K + 9% class 4 NIC) – which isn’t worth the candle. (I haven’t adjusted this for £2000 of permitted tax free dividend income). My intention, once 'retired' is to spend about 75% of my time in England and 25% with by wife in Asia.
Would it be legitimate for me to set up a UK limited company with my wife – even if still in the Far East - as the equal (or majority) shareholder and to have any consultancy income paid into this, drawing no salaries but paying periodic, large dividends? This would (a) allow tax efficient transfers to my wife, rather than my paying them out of my taxed pension/investment income and (b) would give me occasional major ‘bursts’ through the £100-120K p.a ‘trap’, timed when I can see a decent VCT/EIS offer coming up.
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