Salary vs dividends - have i got this right?
Hi - would really appreciate a bit of short sage advice please, - I know that some of you are likely to say that I should go and see a professional, and I will, but, I'd just like to get a feeling for if I am already in the wrong, and what the suggested route would be.
I have a ltd co, of which I am the sole director. Income is sporadic, and tends to come in lump sums. Thus far I have withdrawn about 70% of the income received on the basis that I would claim this as a dividend, - and these payouts have been irregular in both timings and amounts.
I also have a paid, separate, employment that utilises my personal allowance and puts me in the higher PAYE tax bracket.
What would be the general recommended course of action? Of course I would like to minimise, legally, my tax liability. Should I start paying a salary from my ltd co, but that would obviously attract EE/Eer NI, and PAYE at 40%, which seems inefficient. Can I withdraw the money from the business, and declare the dividend in one go at the end of the year, or should I declare a dividend every time I draw money? the business is being run on a very prudent basis, and will declare sufficient profits to cover the dividends drawn (only asset in the business is a £800 laptop), and I presume this falls into the annual investment allowance and therefore 100% writedown in year 1?
Any thoughts appreciated
Steve





Salry vs Dividends