The changing tides of managing personal income through a small limited company.

Gary1984

It's not clear to me what you're asking. But if you are considering becoming an employee of your limited company's main client then you'll be caught by IR35 legislation and will be required to pay full tax and national insurance on any money you'd previously received from them.

Dazed_and_C0nfused

You shouldn't be paying any NI.
Why wouldn't I want state pension at retirement age?

You have clearly misunderstood how the State Pension works.

Currently earning £123* each week is sufficient to gain a qualifying year for State Pension purposes, you don't have to actually pay any NI.

* this has to be reported to HMRC by the employer under the Real Time Information system for it to end up as a qualifying year

solidpro

Everyone's getting bogged down in the weeds here. Point taken about the NI.

Forget about IR35. If your ltd company has 100 customers and you're required to stay as a Ltd. company due to risk, status, regulation, etc, then the question is, are there any alternatives to director income besides salary and dividend, excluding private pension contributions (which AFAIK have to be equal or below your combined salary and dividends anyway)?

dunstonh

are there any alternatives to director income besides salary and dividend, excluding private pension contributions (which AFAIK have to be equal or below your combined salary and dividends anyway)?

There is no limitation due to earnings with company contributions.   And dividends themselves don't qualify as earned income for pension purposes.

The shareholding director can effectively pay £200,000 into a pension as a company contribution in year one, provided they meet carry-forward qualification and have made no previous contributions in the previous three years (and assuming there is sufficient profit in the company to cover it to get corporation tax relief and have it allowable by HMRC).   At the same time, they could take £12,570 salary.

Salary only limits personal contributions.  Not employer.

Gary1984

Yeah the only answers to this then are to liquidate or sell the company, pay dividends, pay salary or contribute to a pension.  

There's some small things you can do, like expense the Christmas party, give yourself some small gifts (voucher up to £50 per year 6 times a year) but nothing that significant.

You can offset dividend tax with VCT or (S)EIS investments but they're locked-in, illiquid, risky and subject to high fees.

I'd suggest you talk to your accountant and see what they say.

Hoenir

Gary1984 said:

 like expense the Christmas party, 

Not tax efficient though and has to be reasonable. 

solidpro

dunstonh said:

The shareholding director can effectively pay £200,000 into a pension as a company contribution in year one, provided they meet carry-forward qualification and have made no previous contributions in the previous three years

Reads like "there is no limit assuming you haven't hit the previous 3 years limits"? I don't understand.

Wasn't the limit raised recently to 'help GPs'? 

ColdIron

You can contribute up to the annual allowance (and receive tax relief) this year and carry forward any unused allowance for the previous 3 years. You need to have been a member of a pension for those 3 years

The annual allowance for the current and previous year is £60,000 and £40,000 for each of the previous two. £200,000

solidpro

ColdIron said:

You can contribute up to the annual allowance (and receive tax relief) this year and carry forward any unused allowance for the previous 3 years. You need to have been a member of a pension for those 3 years

The annual allowance for the current and previous year is £60,000 and £40,000 for each of the previous two. £200,000

So "There is no limitation due to earnings with company contributions." but there is a limitation of £40k then £60k a year.

ColdIron

solidpro said:

ColdIron said:

You can contribute up to the annual allowance (and receive tax relief) this year and carry forward any unused allowance for the previous 3 years. You need to have been a member of a pension for those 3 years

The annual allowance for the current and previous year is £60,000 and £40,000 for each of the previous two. £200,000

So "There is no limitation due to earnings with company contributions." but there is a limitation of £40k then £60k a year.

There is no limit on contributions but there is a limit on the amount that can receive tax relief. See my parenthesis above