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Where Taxpayers and Advisers Meet

dividend v salary What is best?

para7070
Posts:5
Joined:Wed Aug 06, 2008 4:06 pm

Postby para7070 » Fri Mar 14, 2008 11:31 am

I am the director of a Ltd Comp and will expect to earn approx 60-80k before corporation tax during my current financial year. It is now my full time employment as opposed to a part time hobby.

I was wondering if it is best to pay myself the current LEL (105.00 per week 2008-09)and draw dividends as opposed to a salary itself.

Has anyone had this dilemma and how did they get over it?

Advice or info would be much appreciated.

Thanks

Para7070

Sofia1
Posts:69
Joined:Wed Aug 06, 2008 3:31 pm

Postby Sofia1 » Fri Mar 14, 2008 2:59 pm

YEs just as you say, the minimum salary that keeps you paying NIC at minimum level. The take a dividend as a balance up to threshold of 40% tax, allowing for 10% tax credit on dividends - but your acct should be able to advise. Avoid monthly payment of dividens as that could be construed as salary, and keep a board meeting minute authorising each divi.

leedsCIMAstudent
Posts:98
Joined:Wed Aug 06, 2008 3:30 pm

Postby leedsCIMAstudent » Mon Mar 17, 2008 6:06 am

Beware of IR35 though - what is the nature of your profession?

Even for individuals not caught by IR35, advice from accountants who specialise in smaller companies is to pay a realistic salary (maybe 30-50% of the years' turnover) then pay the rest as an annual dividend as per the above.

If there is a chance that you could be caught by IR35, then salary and annual bonus (paid via the payroll with PAYE deduction) is perhaps recommended.

para7070
Posts:5
Joined:Wed Aug 06, 2008 4:06 pm

Postby para7070 » Mon Mar 17, 2008 8:53 am

Thank you Sofia 1 for your help.Much apprciated.

Leeds CIMA Student- Thank you also.

I am a Health and Safety Consultant. One man band but will take on one new staff at start of new tax yeart to do paperwork etc etc.

Regards

Para7070


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