Capital Gains tax

Tincaman

Hi, if I set up a ltd company and have me and the wife as the owners/shareholders, can i pay us both dividends of say £5k each at the end of the year and thereby pay no CGT or income tax?
Thanks for reading

Pennywise

Tincaman wrote: »

Hi, if I set up a ltd company and have me and the wife as the owners/shareholders, can i pay us both dividends of say £5k each at the end of the year and thereby pay no CGT or income tax?
Thanks for reading

Corporation tax will be due on the profits made out of which the dividend is paid.

chrismac1

The normal route in these situations is to pay anyone who has no other employment 475 per month and submit a year-end P35 so that the person gets a credit in the National Insurance pot. Then pay dividends from after-tax profits, taking care to ensure the dividend is not illegal - and doing board minutes and dividend vouchers. There is no prospect of a CGT liability until the shares are sold or otherwise disposed of.

Note also that the dividend payments can be more complicated where one shareholder is near an important threshhold of tax. £43k, £100k, £150k. Paying a dividend which takes the shareholder into a high tax bracket - especially the 60% bracket at £100k - makes no sense. Overall, from the nature of your post I think you'd benefit from hiring a good local accountant who can steer you through the pitfalls of the Companies Act and the tax laws.