Making your wife a share holder

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Hi all, just joined the forum and have a question you might be able to help me with ?.

I have just this year (january) started up a limited company. I work offshore and am consulting for various service companys. Basically i get paid on a day rate and i invoice at the end of the month for the days + any expences.

Now what i was told by my advisor was that i should take £600 a month in salary and up to 3k a month in dividends. Now as i understand it i can take this amount of divy's without being taxed, is this right?.

I only hold 10% of the shares in my company and am the only share holder. If i make my wife a 10% share holder as well can she take the same divy as me each month ?. If so how do i go about making her a share holder ?.

Sorry for all the questions in my first post :001_rolleyes:

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[Mike Lewis]

Ads,

First, it's not true that the dividend is untaxed.The company (which is you) pays the dividend out of its profits. However, at present, the dividend escapes national insurance contributions (employees and employers),which could be considerable.

But be aware that the government is trying hard to prevent the kind of tax avoidance you have described. I'd suggest you read up on the Arctic Systems case, which is a test case in this area. Cases where the spouse is a nominal shareholder, merely to reduce the overall tax bill, are especially likely to be stamped on some time in the future (although the government do seem to be acting slowly on it just now).

As to how to make your wife a shareholder, it's simple enough, but I'd suggest -- with all due respect -- that if you need to ask these questions, you get some profesional help from someone who understand these issues.

Mike

 

[Mike Lewis]

By the way, welcome to the forum.

Mike

 

[stugster]

Hi Ads,

Welcome to the forums

Mike has already covered most of it. Dividends are what is paid to shareholders from the profits of the business. If your business doesn't make a profit, you cannot pay the shareholders dividends.

Your tax code will tell you how much money you can earn (through normal pay) before you're taxed on it. I'm not an accountant, so what I say should be taken lightly here!

Most accountants will tell you to pay yourself that amount (take the tax code 644L as an example - this means that the person can be paid £6440 a year and not pay any tax on it). When you reach the threshold, you'll pay yourself through dividends.

Lets assume the company has made £10,000 pre tax profit. You have to then pay your corporation tax (Which is around 21-28%). Once you've done this, you're left with the final profit of the business - and it is this which can be used to pay your shareholders dividends.

Assuming you are the 100% shareholder, you'd be entitled to the £10k less the 28% corp. tax. As such, you would be able to take £7,200 as dividends.

The Government aren't stupid, and you'll find that your PAYE rates, National Insurance Contributions, etc. closely match the amount you pay in your Corporation Tax are very very similar. There isn't really that much of a difference nowadays - but it is imperitive you speak to an accountant to work out what to do. Most accountants will be happy to talk it over for an hour free of charge.

I only hold 10% of the shares in my company and am the only share holder. If i make my wife a 10% share holder as well can she take the same divy as me each month ?. If so how do i go about making her a share holder ?.

I'm guessing you mean 100% shareholder? If you're the only person in the business with shares (unless you have shares that haven't been 'assigned' to others) then you'll be the only shareholder (100%).

To make your wife a shareholder, you simply ask your accountant to file the form, or you can do it yourself, at companies house. ( see: Statutory Forms ) Depending on how your shares are currently issued and the way you have them set out, will depend on what form you send to companies house.

Please note: I could be wrong in all of I've said! This is just how I've come to learn it. Get in touch with an accountant, or wait a wee bit for one to pop up here

 

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Thanks for the replies lad's.

The way i understood it was that when i set up the buiseness my advisor assigned ten shares to me. The rest were held by my company. TBH i dont really understand how it all worked. I am due another meeting with him soon so i will clarify.

With my company i invoice like a said per day and as i work in norway the company i work for pays my norwegian tax (50%). This i guess is the same as the P60. I am told that when i produce this along with my yearly books it goes towards my corporation tax as the UK and norway have an agreement.

What i am invoicing for is labour + expences. So after corp tax, NI is paid it would all be profit right ?.


Is there any good websites that i can read up on the ins and out of running a LTD company ?.

Thanks again for the info .

ATB

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[Scottish Business Owner]

Stuart has pretty much covered most of what you asked. I think your confusion with shares is down to the difference between authorised share capital and issued share capital. When you set up a limited company you set up an authorised share capital say 100 £1 shares. You also have issued share capital which in your case may be 10 £1 shares. The authorised share capital is there to be distributed in the future for example if you brought on more people and wanted to give them a share holding.

If you are the only one who holds shares then you are 100% shareholder as it's based on issued share capital. Paying dividend and doing it through a payroll system very frequently mean little difference but ultimately I would always recommend advice on this aspect as it very much depends on your individual circumstances.

As far as other resources why dont you try the link below, I think it may be of some use

Taxes in Norway (Norway - the official site in the UK)

 

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,

Now that you talk about it im sure that is how it was explained to me back in January.
Not having the head for buisness it kind of went in one ear and out the other :001_unsure:. Now i have been set up for 4 months i am starting to want to know how it all works.:thumbup:.

I have read the link pages and there is some good info in there. Im away now to spend the night (nightshift) looking up how to run a LTD company...lol...

Cheers again

Adam