Salary V Dividend

Dawny
Dawny MAAT, AAT Licensed Accountant Posts: 62 ? ? ?
I have a client who is sole director and shareholder of his consulting business. He doesn't pay himself regularly and has only been operating for a year. He's about to take his first withdraw from the company as a dividend. Although this payment is legal as there are enough funds in the reserves, the director doesn't want to take any as salary.

Should I advise to take at least some of this payment as salary?

The director is over 65 so there is no benefit for pension.

Thank you for your help!

Comments

  • Dawny
    Dawny MAAT, AAT Licensed Accountant Posts: 62 ? ? ?
    No, the director doesn't receive any other income and there would be no tax advantage to taking a salary.

    My question is really on thoughts on how the HMRC would view a company where only dividend payments were being made to the director, as opposed to a salary.
  • MarieNoelle
    MarieNoelle Moderator, MAAT, AAT Licensed Accountant Posts: 1,369
    You mention he is over 65 does he already receive a state pension and private pension? If below the personal allowance it would be beneficial for him to take a salary up to the PA level as this is is deductible on his ltd co profits.
  • Neillaw
    Neillaw MAAT, AAT Licensed Accountant Posts: 307 Dedicated contributor ? ? ?
    Is the company registered for PAYE.
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