Minimise tax

[Forbes Young]

Can someone please tell me if there is something wrong with this approach to minimising tax:

Assume gross income £100K
Expenses £15K
Salary £10K

That leaves £75K to be taxed at 20% for corporation tax purposes, leaving £60K.

If in the 2014/15 tax year, I take £30K as dividends, (so that £30K + £10K = £40K is just below the lower tax band for income tax), that leaves £30K.

Now assuming I no longer work in 2015/16, can I take the remaining £30K without paying any tax?

If not, what is my best strategy (ASSUMING ALL ALONG I WILL NO LONGER WORK EVER AGAIN AFTER 5th April 2015)?

Thanks

If you take £30k as a dividend it needs to be grossed up by 10/9 for purposes of the income tax calculation = £33,333 plus £10k salary = £43,333 which exceeds the £41,865 HR Tax threshhold. If you take £28,500 as a dividends plus your £10k salary and thats the only income you have in this tax year, then you wont pay any tax.
IE £28500 X 10/9 = £31,667 + £10K salary = £41,667.
Yes you are free to take £31,500 that remains as a dividend in the next tax year and if thats all your taxable income is in this tax year, you wont be liable for any income tax.

[Waldorf]

If you take £30k as a dividend it needs to be grossed up by 10/9 for purposes of the income tax calculation = £33,333 plus £10k salary = £43,333 which exceeds the £41,865 HR Tax threshhold. If you take £28,500 as a dividends plus your £10k salary and thats the only income you have in this tax year, then you wont pay any tax.
IE £28500 X 10/9 = £31,667 + £10K salary = £41,667.
Yes you are free to take £31,500 that remains as a dividend in the next tax year and if thats all your taxable income is in this tax year, you wont be liable for any income tax.

That assumes that the next government do not make any major changes to tax system, especially the way dividends are taxed. i would consider taking all this tax year and suffer the extra tax, dividends could be a target if Labour get in. Labour like going for taxes increases on things people do not understand.

[eek]

That assumes that the next government do not make any major changes to tax system, especially the way dividends are taxed. i would consider taking all this tax year and suffer the extra tax, dividends could be a target if Labour get in. Labour like going for taxes increases on things people do not understand.

Why this tax year? You can't change tax rates retrospectively so any changes Labour implement would not start until April 2016. Even if they implemented them immediately after an election (and they can't and won't) anything taken in mid April 2015 would be subject to the current rules.

[Forbes Young]

That assumes that the next government do not make any major changes to tax system, especially the way dividends are taxed. i would consider taking all this tax year and suffer the extra tax, dividends could be a target if Labour get in. Labour like going for taxes increases on things people do not understand.

Very much doubt the tax rates etc will be worse in the next tax year. Governments set the next years rates months in advance rather than change things immediately - to do so would cause chaos. The tax allowances rarely go down overall and as I understand it for instance Income Tax Personal Allowance will increase to £10,600 for the 2015/16 tax year.
So I think you are being rather pessimistic about things here.

Graeme Bennett ACMA MBA

[FMCG]

If you take £30k as a dividend it needs to be grossed up by 10/9 for purposes of the income tax calculation = £33,333 plus £10k salary = £43,333 which exceeds the £41,865 HR Tax threshhold. If you take £28,500 as a dividends plus your £10k salary and thats the only income you have in this tax year, then you wont pay any tax.

Apologies off topic - would our resident professional colleagues think it reasonable to charge a client in their first year of trading (ie naive) £150 to give this advice. To add insult to injury an additional £150 because the shareholding is split 60:40 between husband/wife ie director/director.

For the avoidance of doubt - there is some superb advice on this forum

[TykeMerc]

Apologies off topic - would our resident professional colleagues think it reasonable to charge a client in their first year of trading (ie naive) £150 to give this advice. To add insult to injury an additional £150 because the shareholding is split 60:40 between husband/wife ie director/director.

For the avoidance of doubt - there is some superb advice on this forum

It would depend how their service is structured and priced. As a Nixon Williams customer I pay an all inclusive annual price with unlimited advice, but I may be paying more than you are overall. That being said I feel I get value for money.