My Client has a small Ltd Co and does contracting work in financial services. The Ltd co makes about £80k profit. He hasn't paid a salary to himself. Are there any pros/cons to this?
He takes dividends instead of about £20k.(ensuring that he stays within BR tax band)
He is 60yrs+, on a good final salary pension scheme and wants to avoid paying HR tax. I have spoken to him about losing BPR if the Ltd was seen as an investment c with large cash balances (150k) but I've also been advised that unless the Ltd Co is doing something with the cash ie investing it, this is unlikely. Background - client did have a heart attack 5 yrs ago. His plan is to work less and less over the next few years and continue to draw £20k or so pa.
Anyway - I cant see any tax consequences of not paying the salary other than hoarding cash in the Ltd Co. Am I missing something? He doesn't need the NIC - he has worked since he was 17 so will have full state pension.
Many thanks
Related resources
Replies (3)
Please login or register to join the discussion.
Corporation tax deduction
If a small salary was paid (within the personal allowance) then the company would get a deduction against their corporation tax.
but he would pay BR tax on it. If he pays a dividend, there is no CT relief but no additional BR tax to pay.
I couldn't see any advantage taxwise. Or am I missing something?
Pension
Sorry I missed the part where you said had pension income. I assumed he still had personal allowance.