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Where Taxpayers and Advisers Meet

Optimizing tax in the UK

Posts: 12
Joined: Sun Jun 17, 2018 2:59 pm

Optimizing tax in the UK

Postby Cap_Scarlet » Thu Aug 09, 2018 11:02 pm

I am looking for a general steer before I pay my tax advisor for some more detailed advice :)

Here is my thinking.

My wife and I moved back to the UK on 5 April 2018 after a long time overseas so we will be fully tax resident for 2018 / 2019.

We have income as follows:

1. Consultancy income for me c. 200-300k per annum which will come through a limited company in which myself and my wife are 50:50 shareholders. I may only have this source for another 12 months.
2. Pension income for me from a previous employer of c. 100 k per annum.
3. Investment income c. 30-40k per annum.

Around 75% of the investments are in my wife's name and that is her only source of taxable income.

My challenge is - what to do with the consultancy income to optimize tax?

My simple answer is simply to take the money out of the company as dividends to make full use of my wife's basic rate band.
Given that the consultancy income will only be short-term and assuming we make 250k in the next 12 months I would aim to take the dividends in 3-4 installments over the next 4 years i.e. c. 80k per annum split between us.
Is there any merit in paying my wife a salary from the company - but not myself? Can I do that?
We will use our full ISA allowance to shelter as much income as possible but given we will have no earned income I assume there are no other ways to shelter assets/income (e.g. via a SIPP?).

Appreciate any thoughts :mrgreen:

Posts: 430
Joined: Fri Aug 07, 2015 2:17 pm

Re: Optimizing tax in the UK

Postby SteLacca » Fri Aug 10, 2018 8:57 am

There are options other than your suggestion, but you then have to plan effectively. Your circumstances are such that there's more to consider than can be condensed into a couple of forum posts, but as a start, if you don't need to withdraw income from the company then there's the option to moneybox in anticipation of an MVL (subject to the suggested legislation to prevent it not being introduced).

Honestly, push some of that money towards your accountant who will know your circumstances better than any of us, and can offer you all the options, with the appropriate warnings.

Posts: 3
Joined: Tue Jun 19, 2018 9:52 am

Re: Optimizing tax in the UK

Postby TheAccountancySolutions » Fri Aug 10, 2018 11:17 am

I wonder, how you would ask for free advice if someone is to save you lots of tax and do tax planning for next year and then you will go back to your tax advisor and educate him. If you would like to have tax planned and compliance did in a better manner and if you need to change your accountant lt us know.
Aatif Malik | Managing Partner

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