Preparing for ILR - Finances

[merkkrazy]

Hi

I will be applying for ILR in Nov-2015, that gives me around 12 months to be ready with my finances. As calculated on points-based calculator on UKBA website, I need to be earning at least 55K to be eligible. My CA has suggested the following:

1. Take less dividend (around £2350) from now till Apr-15
2. Take more (around £4150) from Apr-Oct 2015, making it 55K in that 12 month period.
3. Do not take any dividends post that period (Nov 2015 to Apr-2016) in order to avoid paying higher tax.
4. They have advised taking the minimum salary (£812.50) throughout the period.

I was wondering if this calculation is the best way forward? Or should I take more salary than dividend just to show/ please UKBA that I am a high rate tax payer?

Anybody who has recently applied for ILR, could you please shed some light?

Thanks
Merk

[Craig@Clarity]

Hi Merk,

ILR will be based on gross income being gross salary + gross dividends.

It's difficult to say whether what has been set out for you is the most efficient since we have no idea what your income is since 6 April 2014 up to now. If you've had a previous job, that employment income is going to come into play in deciding whether what has been proposed is efficient.

Assuming you've had no previous income whatsoever, in terms of balancing risk, appropriateness and tax efficiency, think about a minimum wage of say £12k gross + £43k gross dividends for the 12 months to November 2015.

What that would mean is a split as follows:

1 Nov 2014 - 5 April 2015: Gross salary of £1000 x 5 months = £5,000 + Gross dividends totalling £36,865 (Net dividend totalling £33,178)

6 April 2015 - 31 October 2015: Gross salary of £1000 x 7 months = £7,000 + Gross dividends totalling £6,135 (Net dividend totalling £5,521)

The above would keep you below the higher rate tax threshold in this tax year, again assuming you have no other income since 6 April 2014 and you have a full personal allowance. This is also only do-able, if you have sufficient profit after all taxes have been set aside in your company in order for you to take that level of dividends out each month.

From your point 1. though, it would appear you may already have some income?