Can anyone advise on the best balance between paying yourself, paying dividends and retaining money in your ltd company. Currently I pay myself a very reasonable salary the occasional dividend but still have ended up over time with money in the company. Which during a recent lean period proved very useful. A long term contractor firend nearly had a heart attack when I told him that I had money in the company but depending who you speak to or what your read advice varies.
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Maximising pay..
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Keep money in the company for 6 months+
As you found out its worth having money in the company for the lean periods, its better in the company because that way you pay less tax if you take it out during low earning periods. This doesn't mean you shouldn't earn interest or do something useful with it while in the company. If you have a year out then you can take out the money and use the full amount of your tax allowance. The only risk is if you fail to submit your acounts.
Unless you are caught by IR35 then there is no reason to pay yourself ' a reasonable salary' pay yourself the minimum and take dividends, unless of course you consider HMRCE is a worthwhile charity.Always forgive your enemies; nothing annoys them so much. -
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I agree with vetran! One additional comment - avoid paying "regular" dividends as this attracts Hector and Co! Build up personal funds outside of the Ltd in some way so that you can "survive" on drawing a lower salary and wait for an annual or 6-monthly dividend.
How much money you leave in the Ltd depends on how confident you feel that you can get a new contract straight away or whether you will have periods (planned or otherwise) between contracts.
HTH.Comment
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