Hi, we're about to relocate and will be renting rather than buying another house. DH has a new job, on good pay, but will be working as a contractor rather than permanent - so will set up a Limited company. To be tax efficient, I think he needs to pay himself a low salary then earn through dividends instead.
This may be a problem in terms of proving ability to pay to a letting agent / landlord, but as we have a lump sum of money, we could pay upfront for the duration of the tenancy (hoping for 12 months as we need to stay put with reception applications pending).
Would a landlord find this acceptable / advantageous, and are there any risks or downsides for us that I haven't spotted? Or any other way to address this?
I'm a landlord and I'd bite your hand off. I think it would make it a lot easier for you to negotiate a good rent as well. As long as your credit rating is good, I don't think it would be hard to get a LL to agree.
The risk to you would be that the landlord then became extremely slack about upkeep of the property. But the sort of landlord who did that would be regardless I suppose.
Great, it's good to know it's not unheard of. I'll have a think about the issue of not being able to withold rent if critical repairs are ignored, hadn't spotted that o e. Just need to find the right house now!
Sooz, many thanks for that, lots to look into there. I think it's highly likely we will find a house through a letting agent, so will discuss all of this with them. And I guess there will be a risk - now i think about it, when I rented a long time ago, I had all sorts of problems when the landlord defaulted on the mortgage and it got repossessed.
the dividends wheeze to avoid NI (not tax) mostly got wiped out with IR34 more than ten years ago.
When I was in business on my own I didn't try that, I found it an advantage to be able to show a high taxable income, for example for a mortgage.
There is however a substantial advantage in his company making contributions to his pension fund, as company contributions are free of income tax, and employee NI and Employer NI as well. You have to keep up with changes to the law as there are some people who try to take unreasonable advantage of loopholes.
With pension contributions, you can wait until near the end of the tax year to make them, they do not have to be regular monthly. This enables you to make a decision on revenue and costs for the year, and affordability, and tax bands.
If you are doing genuine work, of value, for his company, it can pay you a reasonable market-rate wage for office and telephone work, for example, which may be useful. If it is clearly a scam and you aren't really doing work of that value, then it is illegal.
Ask around for a recommended local accountant who does plenty of small-trader accounts and will be familiar with the latest methods. You don't want to get on the wrong side of the revenue.