Salary Increase v Dividend Decrease = Impact on government help available

JAK99

As a director of my own very small limited company (I am the only employee), I usually take only £200 pcm under PAYE salary and then make up my income under dividends.

I furloughed myself for 2 months.

I wish to swap around how I take my income i.e. increase my PAYE salary from the said £200 and reduce the income taken under dividends - it appears that in the current climate, I will be better to rely on PAYE salary as opposed to dividends.

Can I do this under the furlough scheme?

What are the consequences?

Would I qualify for the new £1,000 bonus?

jimkelly

You're too late for this crisis, anything you do now will only be beneficial/detrimental if/when (hopefully not) the next crisis comes along.

I suggest you speak to your accountant before doing anything too hasty.

If you've been operating like this for a number of years, you'd have almost certainly received (saved) more (by paying less tax overall) in previous years than what you would have got from the maximum available under the SEISS self employed grant.

The furlough scheme is closed to new entrants.  If you haven't been furloughed before now, it's too late to either start now or be eligible for flexible furlough.  As you have previously been furloughed, then you will be eligible for the £1000 bonus - but you will need to increase monthly pay to £520 between Nov-Jan*.

* - but check the small print on this when it's released by HMRC.

Grumpy_chap

To take only £200 per month is a very low figure - how did you work that out?  Most people take either primary or secondary NI threshold or income tax personal allowance.

dunstonh

As a director of my own very small limited company (I am the only employee), I usually take only £200 pcm under PAYE salary and then make up my income under dividends.

£200pm is a very unsual figure.   The usual figure is to go to the primary threshold with the salary and then dividends beyond that.  Some accountants will go to the personal allowance with salary.   However, the important thing is to get your salary to the primary threshold as that qualifies you for state pension (primary in the case of no employees).   £200pm does not.  Dividend income does not qualify you for the state pension.

How long have you been doing this? (hopefully not too many years as your state pension position may be compromised).

Can I do this under the furlough scheme?

No.  You can only furlough to 80% of your salary as it was in March.  So, £200 (assuming that it what it was then) means £160 is all you can claim.  

Would I qualify for the new £1,000 bonus?

Only if you furloughed yourself previously (it is too late now if you havent).

What are the consequences?

Your state pension entitlement would be my main concern if I was you.

JAK99

I have other investments which take me to the various thresholds - Thank you to everybody for responding. 

dunstonh

JAK99 said:

I have other investments which take me to the various thresholds - Thank you to everybody for responding. 

Investments do not qualify you under National Insurance.  No NI qualification = no state pension