single director on no wage or dividends

single director on no wage or dividends

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I am a single director of my LTD, there are no employees, no other directors. I have a little profit, paid corporation tax, but want to keep it in the company and dont plane to take dividends or salary for a while. Is it OK like this or do I have to take salary or dividens as a director?

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By johngroganjga
17th Jul 2016 10:05

It's a free country. Have you ever heard of someone being sent to prison for not making a company they control pay them a salary or a dividend?

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By Madeleine
17th Jul 2016 11:45

I've been doing this for some years now for exactly the same reasons as you. The only problem I have had is that HMRC will insist on putting my tax code on my nil company salary. Thus every year I have to phone them up and get it transferred to a tiny pension I get. Every year they say oh that's because we assume your main income is from your salary. And every year I say but my SA return clearly shows no salary from My Co. Sorry they say we will make a note on your file. So far, touch wood the current tax year the tax code is assigned correctly without me having to phone them

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By lionofludesch
17th Jul 2016 18:03

You don't have to pay yourself a salary or dividend.

Changed as long ago as 1973. Before that there was something called "close company apportionment", which was to be avoided like the plague.

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By Tim Vane
17th Jul 2016 18:28

I assume you have other income that is using up your personal allowance? Otherwise you'd be mad to not take a salary, you're just gifting money to the taxman.

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Replying to Tim Vane:
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By lionofludesch
17th Jul 2016 19:06

Very good point, Tim. I had assumed that myself but it'd be nice if the OP clarified.

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By Madeleine
18th Jul 2016 14:18

I agree with Tim 100%. I've had an interesting problem. I took a salary for a while (no divis) when I left what I reckoned was my last contract. So saw myself as 'retired'. My aim was to keep building up qualifying years for the State Pension. Bear in mind I'm a woman so have been caught up in the new State Pension debacle. Then they reduced the qualifying years to 30 (by then I was well over that limit) so I thought, hmm.......I'm not sure about this , why keep paying a salary when it's not going to get me any more State Pension better to take divis. For a while I did neither while I pondered. Then the goalposts got moved again. Now you needed 35 qualifying years. This was still less than I had so it still begged the Q why take a salary I might as well take a divi. At this time it was banded about that the new pension would be £155. Meanwhile I was doing my hardest to get pension forecasts out of the system but as it was so new this was really difficult. One request I submitted took 7 months to come back and then I had to put in an additional request which took another few months. Meanwhile a pension I had from a previous life as a permie suddenly went wobbly and it looked like the fund was going to go into the government pension bale out dept. So against my planning I started to take that pension 4 years early so I was actually receiving my pension if things went bad. Taking that meant I was now using up my PA. Yes, OK, I know, many aren't lucky enough to have that but nonetheless it's totally blown my planning out the water. Now the State Pension stuff has settled down you can get proper statements etc and NOW I'm told I am 2 qualifying years short of the £155 full pension (Even though I have 42 qualifying years) because I've got the pension from my permie job. They didn't emblazen that bit around when they first talked about the new pension. The implication was that EVERYONE would get the full amount. Now if I take a salary out of MyCo it will be taxed at 20%. I was unfortunate, I'm one of those I think 200,000 caught up in the 1953 year born on a really bad date. Thus I've been caught up in the group of people who have had their pension date moved twice. I'm still pondering what to do. There is no immediate rush. My advice to any ladies out there (or gentlemen, your wives) please do two things. 1) get a forecast of your state pension. When you have received that 2) get a statement of your qualifying years. That will detail any years short you are because of whatever reason and give you the opportunity to pay an missing NI. Sometimes it could be a piffling amount and this will buy you an extra year. Once you have the two statements ring up the pension people and ask exactly how many qualifying years you are short of getting the FULL £155 pension. And what it will cost to buy them. Don't assume because you have well over 35 years that you will get the full pension. Do it now while you have time to start doing something about it. To be honest I guess really you chaps should do this as well. I'm only aware of the issues for the ladies because of how it has affected me but there must be many chaps who think they are in line for the full amount and are not.

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Replying to Madeleine:
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By Trish Baillie
18th Jul 2016 16:38

Nothing to do with tax as such but you might care to follow the progress of the WASPI campaign for women like you (and me) who have been so badly affected by the pension changes.

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By Madeleine
18th Jul 2016 17:27

Yes, thanks. Have been keeping my eye on that.

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By lionofludesch
19th Jul 2016 11:31

That's true. I have a couple of clients who were affected by the 30/35 nonsense.

The Government want you to take responsibility for your own pension and then keep changing the rules. Absolute wasters.

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