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Do I pay myself a salary?

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I have recently cut my hours at my day job and now receive a reduced salary of £15k per annum. I have started my own business (limited company) and I also do the occasional freelance work (amounting to around £5k per year for which I file a Self Assessment return). Would it be tax efficient to take any further salary from my own business or wait until the end of the year and take dividends?

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19th Jun 2019 22:45

What did your accountant say when they advised you on the merits or otherwise of incorporating? If you change your mind about what you wanted then you should go back and talk to them again because it may well be that you need to rethink your plans if your situation has changed. As ever, advice is better given before, rather than after, the events.

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By AW71
19th Jun 2019 22:47

Oh FFS here we go again

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By Matrix
19th Jun 2019 22:55

You don’t need to wait until the end of the year to pay dividends.

However I would not wait until the end of the year to get an accountant who can advise based on your specific circumstances. Depending on the level of profits, there could be small savings from paying a salary.

Admin and compliance are more costly for a company than a sole trader so I would also ask if this is optimal for your business before you start trading.

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20th Jun 2019 02:23

You only have 70% of shares in your company so the tax positions of your other three shareholders will also need to be considered.

So you now have, at minimum:-
Day job salary
Freelance work
New company dividends
New company salary
Other shareholder's positions
Profitability and tax position of the company

all to be considered in addition to the administration effects and costs and also the effects on the company to take into account.

Couple all that with your long term intentions, your age, your pension position, your National Insurance record and the same for the other participants in your company, to name just a few of the considerations and you'll see that the whole situation is a little more complicated than your question sets out.

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to Wanderer
20th Jun 2019 09:06

Wanderer wrote:

You only have 70% of shares in your company so the tax positions of your other three shareholders will also need to be considered.


As the only director, surely he (the OP) would have less off a concern and opposition of declaring dividends, as he is the only person in a position to do so.
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to thestudyman
20th Jun 2019 09:17

thestudyman wrote:

As the only director, surely he (the OP) would have less off a concern and opposition of declaring dividends, as he is the only person in a position to do so.

Yeh, he can ignore the positions of those he has gone into business with if he wants. Sounds like a great recipe for future harmony.
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to Wanderer
20th Jun 2019 11:14

Wanderer wrote:

You only have 70% of shares in your company ....

It'll all be covered in detail in the shareholder agreement ....

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By Maslins
20th Jun 2019 09:18

You have a job, a sole trader business, and also a Ltd Co? I doubt there's a good enough reason for that, so I'd suggest your primary focus should be on streamlining your situation, not worrying about saving a few quid in tax.

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20th Jun 2019 11:41

You know, much as these forums are the basis for interchange of opinions and views, between professionals, they really are no substitute for a face to face conversation with a suitable accountant/adviser.

This really isn't the equivalent of 111 and, you would be well advised to seek a professional opinion.

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