Lump sum

[oliverson]

Largely, I agree with Lance.

Let's put some specific numbers to the test, OK? Let's say, just for example, you pay yourself £8500 a year in salary (so no National Insurance) and pay Mrs the same for a Director's stipend...


.

I've never heard this word before but it's gotten my interest. My wife is company secretary and pretty much does nothing in the business, aside from offer occasional legal advice, for which she is qualified to do. I've been thinking about paying her the same £ 8.5k salary as me but felt uneasy about it given she doesn't do much. However, this 'stipend' may just be a justifiable route to doing that. On the same subject, I'll be taking a company car from April 2020 when the BIK is 0% on electric vehicles. I'm wondering if I could do the same for the wife as well?

Thanks in advance and apologies for hijacking this thread (kind of) :-D

[northernladuk]

With regard to paying your wife, there are plenty of arguments on here that just the responsibility of being a director is worth the payment alone without doing any work. To be fair the fact you've done some diligence and made a decision based on it puts you way head of the raft of couples where the wife probably doesn't even know she's a director so wouldn't worry about it too much.

[WTFH]

I need 1 more contractor rate to get a good mortgage...

OK, I know we’ve kinda skipped over this, but you get a better mortgage by having a bigger deposit.
Right now you’ve got a large lump sum, let’s call it “a deposit”.
If you start using up your large lump sum, then you will have a smaller deposit.

My advice - stick the lump sum into premium bonds, ISAs, and high interest savings.
Then when you need the deposit for your house, you still have it.
Do not put it into pensions, or anything where you can’t access it.

Continue to pay salary & dividend out of your company, again when it comes to the mortgage it will show a consistent and steady income, which is all good for your personal financial profile.

Years ago you got the most options and best rates on mortgages if you were only borrowing 60% - i.e. you put down a 40% deposit. The smaller the deposit, the fewer options and the worse rates.

[oliverson]

With regard to paying your wife, there are plenty of arguments on here that just the responsibility of being a director is worth the payment alone without doing any work. To be fair the fact you've done some diligence and made a decision based on it puts you way head of the raft of couples where the wife probably doesn't even know she's a director so wouldn't worry about it too much.[/QUOTE]

Thanks for the link. Quite an old article but assume it's still valid.

So, if it is treat as a BIK but there is 0% BIK on electric cars for 2020-21 then it's two Teslas isn't it? Either that or a couple of iPace's

Lower the corp tax, claim back a portion of the VAT. Win win. Let's just hope they raise the higher rate threshold to £80k, abolish IR35 and it's showtime.

:-D

[siouxchief]

Thanks all I get what you are saying in regards taking the 7.5% rather than the 10% later. Must have had a brain melt yesterday not getting it. Seeing the numbers makes sense now.

[WordIsBond]

I've never heard this word before but it's gotten my interest. My wife is company secretary and pretty much does nothing in the business, aside from offer occasional legal advice, for which she is qualified to do. I've been thinking about paying her the same £ 8.5k salary as me but felt uneasy about it given she doesn't do much. However, this 'stipend' may just be a justifiable route to doing that. On the same subject, I'll be taking a company car from April 2020 when the BIK is 0% on electric vehicles. I'm wondering if I could do the same for the wife as well?

Thanks in advance and apologies for hijacking this thread (kind of) :-D

1. There's a business reason for having an officer other than yourself. If you fall ill, die, or smash your new EV, someone needs to run the company. So it is legit to have your wife as secretary or director.
2. The role comes with legal responsibilities and liabilities, so it is appropriate to pay her a stipend/salary/call it what you want. If you make it too large HMRC could potentially challenge it as being not for business purposes. No one here has ever suggested that they've heard of HMRC challenging £8.5K. It is pretty standard practice, and it would be hard for them to challenge it for not much benefit. In all probability you are very safe to do this.
3. It might be a lot harder to justify giving your wife a company car. Yes, she's 'working' as a director, but salary and a company car? That might begin to move into the territory where HMRC just might say, 'That's excessive, what's she actually doing in the company.' I personally would not do that and my wife does bookkeeping / payroll (and we have multiple employees) / bill-paying as well as being a company director.

Some time back when I was looking for an accountant, one chartered accountant suggested I do exactly that -- company car for my wife. He's the same guy who told me I could buy a dog, dog food, etc, through the company because it is a 'security device'. He also said he had a farmer client who installed a swimming pool as a sheep dip pool. I did not ask about these things, he volunteered them as ways he could help me save tax. The accountant I chose advised against the dog, the pool, and the company car for Mrs. I say this to say that there are risk-averse people who wouldn't do this and there are at least some risk-friendly people, including accountants, who would. Ask your accountant and choose your own risk profile.

[WordIsBond]

Thanks all I get what you are saying in regards taking the 7.5% rather than the 10% later. Must have had a brain melt yesterday not getting it. Seeing the numbers makes sense now.

Good luck with it all.