salary v dividend

arsenalboy

OK guys, another question.
I am looking to start limited company to work part time in my early retirement.
Looking at many articles on the web they talk about the optimum split of salary v dividend.
My question is can you really decide what split you will have to reduce tax?
Will the taxman not say it is loaded unreasonably to avoid tax or is it completely legitimate?

WHA

arsenalboy wrote: »

OK guys, another question.
I am looking to start limited company to work part time in my early retirement.
Looking at many articles on the web they talk about the optimum split of salary v dividend.
My question is can you really decide what split you will have to reduce tax?
Will the taxman not say it is loaded unreasonably to avoid tax or is it completely legitimate?

Yes, just follow the procedures, and you'll be fine. Make sure you have management accounts (including tax and other provisions) to show the "free" profits were high enough for the dividend, prepare and sign a board meeting minute to approve the dividend, and prepare a dividend voucher. Of course, make sure that IR35 and S660 don't get you, otherwise you'll be fine.