Complicated arrangements, please help with some advice.

[Bodybarnet]

I'll start by apologising for asking these questions when I know many are struggling. DH and I have relatively complex arrangements when it comes to income and I'm not sure what to do. We have an accountant but they never seem to give straight answers. There are a couple of scenarios that we are about to encounter. Could anyone provide any advice or direction please?

DH and I have a Ltd Company. We are are both directors with a 70/30 share split. The company employs us both - DH takes a salary of £12500 and mine is £9000. I also work in a job which pays £24.5k pa. At present we take dividends which take both of our salaries to circa £50k each. The business earns approximately £8.5k per month as a main contract. DH is also a director of another company of which he is a 17.5% shareholder. This company has begun to do well and we are currently invoicing them for work at £1k per month. We jointly own a mortgaged property which brings in £6000 pa although £4300 of that is mortgage which I think we get relief on the interest payments. We currently also have an electric business vehicle which the business is paying for outright which has another 18 months left to pay.

1. As the business has done quite well this year we currently have around 30k sat in the bank. If we were to drawn this down as a dividend we would pay an astronomical amount in tax. By my reckoning:

25% corporation tax 34% dividend tax 9% student loan We would also lose our Child Benefit. Which would essentially give us £7.5k for our 30k. Is there some kind of investment we can make through the business as we don't need to take the money as a dividend?

1. As of April this year my employed salary is due to rise to £35 000. I'm looking into the implications of this and it seems that as I would go over the 50k tax bracket, I would lose a significant amount to tax under our current arrangements. Most dividends would be taxed at 34% and the business would be paying 25% CT too. DH has the option of going PAYE on the 52kpa which we are currently invoicing for which is what the other business would prefer.

Bearing all this in mind, I think the most efficient scenario for ourselves would be for us both to be PAYE in jobs separate to the business, remove our salaried positions from the business and then just draw any extra in dividends. We would still be getting CT and dividend tax of 34% but I don't think that there is a way around this.

Does anyone know if this would be the right thing to do?

I'm sorry this is so long. Well done if you got this far!!

I'd find a new accountant to deal with all this

I don’t think MN is the best place for this question, you need to pay for proper advice from an accountant.

How far over the 50k are you both?

I agree. I would get a new accountant and get them to sort it all out.

You definitely need proper advice from a tax adviser but maxing out your pensions via PAYE will keep your income lower so other income can be drawn from other sources.

If your doing well, why don't you want to pay a fair amount of tax.

If you don’t need the cash you don’t need to take dividends from the company, it can just be left in there. You could lease a nice new EV through the company? Or make directors pension contributions?

We have an accountant but I don't ever seem to get a straight answer. They don't seem to look at the whole picture or how we can maximize our money - I guess that's another role?

We have an appointment set up for February for the 2nd scenario but it only occurred to me over the weekend that the end of the business tax year is end of Jan. It doesn't seem efficient for us to have 30k sat in a bank account when it could be working for us as either a pension or something else but the accountant hasn't mentioned this.

Err we pay plenty of tax thanks. It's not about paying tax but making our money work as efficiently as possible.

Your account sounds absolutely useless. I would definitely get another one!

Thank you. I think I'll speak to our pension people.

Are they supposed to advise like that? This is our second one. The first one advised that it was fine to invest from the business to another business but failed to mention (even when asked) that this would have an impact on personal taxes. I ended up with a totally unexpected 10K bill.
I guess he set the bar pretty low!

You neec to pay more money for a decent accountant because these are really simple questions and I can't believe you've actually paid an accountant in the first place to answer them. And your calculations are wrong.

Casilero It doesn't seem simple to me. The accountant never makes it seem simple either. It's like with the business car scenario - I couldn't seem to get a straight answer out of him about whether that was a good thing to do or not.
Why are my calculations wrong (I realise I've used the increased CT % and it would actually be 19% this year).

You can pay a pension through your Ltd company as directors so you will save on corporation tax. I've been doing this for a few years as like you I didn't want to go above 52k and don't need to but didn't want money sitting in business account doing nothing.

Yep I was going to say pensions.
And a decent accountant should be telling you this.

You need an IFA independent financial adviser and an accountant. IFA should do tax planning and the big picture work with you, then work with the accountant to make sure you're paying the right tax. Sounds expensive but much cheaper than a mistake.

Thank you. That's really helpful. I wasn't sure what the role was that we needed but it definitely felt like there was a piece missing. I'll look into it.

No she doesn't she just needs one decent accountant

@Casilero I believe she does. She's saying she'd like more holistic advice and strategy planning that's quite complex - there may be accountants that will work in that way but in my experience they don't. I personally have both and they work with each other to join everything up.

You need an accountants firm that offer accounts, tax services (corporate and personal) and possibly payroll under one roof.

An IFA is needed for pensions and investments but shouldn’t really be giving much tax advice.

Independent financial advisors aren't necessarily tax experts.

Your Accountant is rubbish, I work with Accountants and they should be sorting this all out for you and advising you on how to minimise tax (legitimately). Sounds like your Accountant just does compliance and not Advisory work.
If you want to PM me I can probably recommend someone

DH and I have a similar set up and have been running a Ltd Company for over 20 years.

Our accountant deals with the monthly payroll, PAYE, CT, SA and VAT. Obviously we pay handsomely for this service. We sit down together a few times a year to review our strategy. Having £30k leftover in the business account wouldn’t concern me because I know the full picture with regards to growing the business to maximise our overall income whilst minimizing our outgoings.

They also offer legal and financial planning. We use our own lawyer and IFA for these services but our accountant is privy to this information so they are able to advise us accordingly.

I would definitely look at getting another accountant.

Agree with this. my first thought was your business can pay up to £40k pa for each of you employers pension contribution. This will reduce CT.

obviously you work elsewhere so you possibly don’t have the full £40k to play with.

if you already have pensions set up you could quickly pay £15k into each pension before your year end?