Salary ups and downs

[mkant]

I need to bring down the balance in the company account and it's going to be tax beneficial to do this over the next few years. So the easiest way would be a sudden 40% increase in salary for 2-3 yrs, and then a sudden decrease once it's done.

But is there any problem with adjusting the director's salary like this? My salary's always been roughly at the same level, and I don't want the hassle of being picked up by HMRC for a PAYE/IR35 check-up. Me thinks I should be able to do what the heck I want with my own salary , but maybe any increases should be gradual.

[Gonzo]

I need to bring down the balance in the company account and it's going to be tax beneficial to do this over the next few years. So the easiest way would be a sudden 40% increase in salary for 2-3 yrs, and then a sudden decrease once it's done.

But is there any problem with adjusting the director's salary like this? My salary's always been roughly at the same level, and I don't want the hassle of being picked up by HMRC for a PAYE/IR35 check-up. Me thinks I should be able to do what the heck I want with my own salary , but maybe any increases should be gradual.

Really?

I assume that you are contracting through a Limited Co (I can't see that you would be asking this if you weren't) in which case the easiest way would be to dividend this profit out (assuming that you own the shares that is).

If you pay it all to yourself as salary then you are doing exactly what the government thinks you should and the IR35 check up is not going to find much extra tax to be paid.

Clearly there are a number of factors to consider here, have you asked your accountant may I venture to suggest?

[BrowneIssue]

I need to bring down the balance in the company account

Put some into your pension?

[pmeswani]

Put some into your pension?

I wonder if there is any tax efficiency in making a charity donation?

But I agree with puting the money into a pension as being a good idea.

[Solidec]

I need to bring down the balance in the company account and it's going to be tax beneficial to do this over the next few years.

Surely any Ltd Co director should be drawing at the very leaset up to the 40% threshold (company profits allowing) each year anyway, so beyond this the next best option is ploughing the surplpuss into a pension, or making any large capital/plant investments for the business, eg Company Car (super green and petrol ofc) or IT equipment?

[Platypus]

Surely any Ltd Co director should be drawing at the very leaset up to the 40% threshold (company profits allowing) each year anyway

Doing that through PAYE is expensive though, with employers NI to pay.

[Solidec]

Doing that through PAYE is expensive though, with employers NI to pay.

Of course, but my point was how does reducing the balance in the company account prove to be tax efficient?

Are we talking tax effecient for the Business or tax efficient for the Individual?

[max]

I need to bring down the balance in the company account and it's going to be tax beneficial to do this over the next few years. So the easiest way would be a sudden 40% increase in salary for 2-3 yrs, and then a sudden decrease once it's done.

But is there any problem with adjusting the director's salary like this? My salary's always been roughly at the same level, and I don't want the hassle of being picked up by HMRC for a PAYE/IR35 check-up. Me thinks I should be able to do what the heck I want with my own salary , but maybe any increases should be gradual.

roughly, how much are we talking about?

[mkant]

Really?

I assume that you are contracting through a Limited Co (I can't see that you would be asking this if you weren't) in which case the easiest way would be to dividend this profit out (assuming that you own the shares that is).

Clearly there are a number of factors to consider here, have you asked your accountant may I venture to suggest?

Hmm, have asked accountant - not very helpful - he glibly says no problem.
He has been wrong before .

The dividend route is not viable due to my particular situation, as I'm in the middle of a 5/6 yr period of UK non-residency. Salary is currently set at £20k p/a and would like to up that to £40k for next 3 years.

HTH
Michelle

[Billy Pilgrim]

Pay yourself a 'bonus' of 20K

Why don't you just shut the company down though - take a 10% hit on whats left in there ??