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.
- 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?
- 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!!