I will get SMP from my PAYE job. Can I also claim dividends from DH's company?

[Rache1S]

I hope there are some payroll people/Accountants out there who can maybe help me with this? HMRC are a nightmare!

I work full-time PAYE and am expecting my first baby at the end of June.

DH is a self-employed Director of his own Ltd Company. I am a shareholder in his company but have never taken a dividend. DH takes monthly dividends of just below the 40% tax threshold and one large annual dividend of the surplus, which all falls into the 40% bracket and is taxed accordingly. I have never taken a dividend as my PAYE job takes me over the 40% threshold so it would not be beneficial to us tax-wise.

I am entitled to SMP from my PAYE job and I know you aren't allowed to earn anything in addition to this while you are claiming (apart from usual bonuses/commission and up to 10 stay in touch days).

I would like to take dividends while on maternity to lower DH's 40% tax liability while my own annual income is much lower than normal.

As a shareholder in DH's company, would it be seen as earnings if I take dividends while on maternity? I have never and will not be working in his company, it will be just be profit I am taking out as one of the owners. I assume I would have to do a self assessment at the end of the year as well.

Sorry it's a bit complicated and long-winded!

First question are your shares of two different share types eg a and b shares to enable your DH to take dividend not you? If you both have the same share type you should have both been getting dividends at the same rate in the past.
You can get dividend, but you will need to complete a tax return.

Yes the shares are different types. There are 2 other shareholders who don't take dividends either, only DH.

Do I need to change my share type to take a dividend?

Thank you so much!

Dividends are investment income not employment income. You receive them because you are a shareholder, so there shouldn't be any problem with you receiving dividends whilst receiving SMP

Lonecat raises a good point - dividends are paid to all shareholders for a certain class (type) of shares unless they waive them. So for example if you have B shares and your DH A shares then the company can choose to pay all A shareholders a dividend but not B, or all B shareholders at a different rate to A. A rate would be £x per share normally

The company documents will spell out the different rights attaching to each type of share so you should check those (sometimes there are types of shares that dont have rights to receive dividends at all).

Do the other two shareholders have the same type as you? If so then they may be entitled to a dividend if you are

You can receive dividend income, or indeed any kind of income, while receiving SMP. You can also work as self employed, or for an employer that employed you in your qualifying week but with whom you do not qualify for SMP.

You only have to register for self assessment if you have earnings which are not taxed, so if you keep your total income (including grossed-up dividends) under the threshold you won't have to, but it is usually worthwhile (see the first question below).

A couple of other questions come to mind: do you have an accountant - most firms will only charge a small fee for adding a spouse's tax return to the work they already do for the company and the director/shareholder? Does the company have "A" and "B" shares or are you waiving dividends - in either case you need to produce the correct records otherwise HMRC can kick up a fuss?

Oops, cross-posted re. alphabet shares.

The other 2 shareholders have the same type of shares as DH and have waived their dividends for the time being. They don't work full-time in the company yet whereas DH does.

I am not sure but I think my shares are of a different type. I will check.

We will most definitely be getting the Accountant to sort all this out including any resulting tax return I need to do. It makes my brain hurt!

It's good to know it is something we can do and thank you all for your expertise

It may well be if you have b shares you won't be able to get dividends depending on the way the company has been set up.

On the other hand, I've set up companies who have a and b shares and the b shares were entitled to dividends but not to vote on company matters

You will need to ascertain this before going further

But no issue getting dividends and smp as long as correctly accounted for.