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Advice for returning to contracting

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    Advice for returning to contracting

    Hi,

    so I was a contractor for over 10 years until last November when I decided to go perm.

    I made my company dormant with about 80k in the business account.

    My perm role has now furloughed me and its looking very unlikely they will take me back any time soon.

    I've been looking at going back to contracting again and have had a few interviews and (hopefully) I will get something soon.

    Here's my questions (yes, I do have an accountant but they are not very proactive and they seem to only answer specific questions):

    1. My wife has not worked since Dec 2018 so would it make sense to make her a shareholder too? Not sure the percentage split to go for.
    2. Should I reopen my existing company for trading again or open a new one (with my wife as a shareholder)?
    3. How do I get the 80k in the company out tax efficiently?

    Thanks

    #2
    Originally posted by too_many_details View Post
    Hi,

    so I was a contractor for over 10 years until last November when I decided to go perm.

    I made my company dormant with about 80k in the business account.

    My perm role has now furloughed me and its looking very unlikely they will take me back any time soon.

    I've been looking at going back to contracting again and have had a few interviews and (hopefully) I will get something soon.

    Here's my questions (yes, I do have an accountant but they are not very proactive and they seem to only answer specific questions):

    1. My wife has not worked since Dec 2018 so would it make sense to make her a shareholder too? Not sure the percentage split to go for.
    2. Should I reopen my existing company for trading again or open a new one (with my wife as a shareholder)?
    3. How do I get the 80k in the company out tax efficiently?

    Thanks

    have you asked your accountant those specific questions? And what did they say?

    Without knowing your personal circumstances.... I'll offer the following.
    1) yes. 50/50
    2) yes. Might as well.
    3) pay salary and dividends once opened again. It will just be BAU, but with a starting pot of retained profit.
    See You Next Tuesday

    Comment


      #3
      He's perm so very much doubt he's got an accountant.. But if he hasn't then this is the time they save you a lot of money so I'd so go engage one and start properly. Just making your wife a shareholder and giving her 10s of K isn't as straightforward as that so get professional advice.

      When you do make sure you explain a long term realistic scenario. Giving your wife the shares, paying dividends and the shutting the Co (or even dormancy) looks like (and is} very aggressive tax avoidance.
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Originally posted by northernladuk View Post
        He's perm so very much doubt he's got an accountant.
        Originally posted by too_many_details View Post
        (yes, I do have an accountant but they are not very proactive and they seem to only answer specific questions):
        See You Next Tuesday

        Comment


          #5
          Originally posted by Lance View Post
          I gratefully accept the idiot of the day award.
          'CUK forum personality of 2011 - Winner - Yes really!!!!

          Comment


            #6
            Originally posted by Lance View Post
            have you asked your accountant those specific questions? And what did they say?

            Without knowing your personal circumstances.... I'll offer the following.
            1) yes. 50/50
            2) yes. Might as well.
            3) pay salary and dividends once opened again. It will just be BAU, but with a starting pot of retained profit.
            Ok, so how about this as a plan:

            1. Make my company active again and my wife as a shareholder with 50/50 dividend split.
            2. Assume my income from the company will be 8k + 32k dividends (rough numbers for now). This is what I was doing before perm.
            3. 32k pro rated over 12 months is approx 3k per month, so I would take out 6k per month (starting from April?)
            4. I can put 40k into my SIPP (like i did before)

            If my wife gets a job though, she will be in the higher income tax bracket and so the divs will also be taxed at 40%. Is it possible to keep her as a shareholder UNTIL she finds a job?

            Thanks

            edit: my accountants are very "execution-only". They are a big firm that I've seen post here. I am considering a move but thats a separate topic.

            Comment


              #7
              Don't be messing around changing your wife's shareholdings regularly. That's gonna raise a flag with HMRC and will look like you are only doing it to avoid tax, which clearly you are, so they won't like it.

              And you can pay yourself as much dividend as you want when you want. No need to break it up in to monthly payments.

              Move accountants before you do all this and get proper advice.
              'CUK forum personality of 2011 - Winner - Yes really!!!!

              Comment


                #8
                Originally posted by northernladuk View Post
                Don't be messing around changing your wife's shareholdings regularly. That's gonna raise a flag with HMRC and will look like you are only doing it to avoid tax, which clearly you are, so they won't like it.
                I would only do it the once though, when she gets a job.

                Comment


                  #9
                  Originally posted by too_many_details View Post

                  If my wife gets a job though, she will be in the higher income tax bracket and so the divs will also be taxed at 40%. Is it possible to keep her as a shareholder UNTIL she finds a job?

                  Originally posted by too_many_details View Post
                  edit: my accountants are very "execution-only". They are a big firm that I've seen post here. I am considering a move but thats a separate topic.
                  The reason you need to use your accountant is because you clearly don't know that divis are taxed at 32.5% in the higher rate.
                  Manage your accountant FFS. Get them on the phone and donl;t let them go till they've answered your queries to your satisfgaction...

                  even better. Switch now before you really need them.
                  See You Next Tuesday

                  Comment


                    #10
                    Originally posted by Lance View Post
                    The reason you need to use your accountant is because you clearly don't know that divis are taxed at 32.5% in the higher rate.
                    Manage your accountant FFS. Get them on the phone and donl;t let them go till they've answered your queries to your satisfgaction...

                    even better. Switch now before you really need them.
                    I don't want this thread to be about my accountant. I'm looking for advice to bring to my accountant for actioning. I will change my accountant at another point in time, not today.

                    Comment

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