Money not needed for essentials - take as nil-rate dividend or let company pay into pension?

scdandem

Hi, I've run a small limited company for several years, predominantly to build up a pension pot, and now is the time to let it wind down naturally. For some time I've been drawing the maximum under the current secondary threshold, paying £1200 per month into my pension via the company and me and the other two directors (husband and daughter are sleeping partners) have been drawing nil rate dividends to the maximum allowed, which they just gift back to me.

This year I've reached the point where, after direct wages and operating expenses, I'm just about at break-even point and still able to pay my salary plus the £1200 per month pension and I expect this to continue as it is for a while longer. This year an excess of about £6k has accrued in the business current account and my quandary is around how best to deal with it tax efficiently. Draw between us as nil-rate dividend or let the company pay it into my pension? 

None of us directors have had any dividends so far this tax year. So my query is:

• is it more tax efficient to draw the £6k between us as dividends (as we would normally do) or is it better to let the company pay it into my pension
• if and when my operating expenses (inc salary and pensions) exceed my gross profit, which would be best to reduce, salary or pension contribution?
• or should I just leave the surplus where it is so that as and when there's not enough to cover costs, it can gradually be used up?

Just a note that everything in the company is properly documented and correct and nobody is being cheated out of dividends, as someone once suggested. My husband and daughter laughed their socks off at that one

Hope I've explained adequately and someone can advise.

Many thanks

Jeremy535897

You are clearly concerned about tax efficiency, but if you don't actually need the money, why is your daughter giving her dividend to you, increasing your estate for inheritance tax and reducing hers?

If the company has corporation tax profits, paying into your pension saves corporation tax at 19% currently, but ultimately you are likely to pay income tax on drawing 75% of the pension pot in due course.