My Ltd company usually has a rent rate £16,000 a year (my aunt is the landlord and this is her only income) I also pay her rental income tax about £2000 a year. You know I was thinking of let her become one of the shareholders in my company. So she can get dividend of £9525 a year and £6475 a year as her salary. The rate of dividend tax is only 10%. Would this save me some money on both of our tax? Is there any other legal issues ?
There are issues. I think there would be an argument against paying a salary to her if she is not doing the appropriate work to justify the salary. You dont say if she is doing any work for the company but I assume she is not.
The divi issue has many issues and i'm not sure if it would generate much of a saving.
Issues quickly would be gifting half or a portion of your company, future disputes, waiving your dividend on a yearly basis, CGT on sale of share, IHT issues, to name a few quickly and this assumes you have the positive reserves (not cash) to pay the annual divi.
Tax saving, not sure how substancial this would be. If a rent is paid the comapny would get a tax deduction worth 16k x 21% = 3.2k, your aunt may currently pay 16k - 6k personal allowance x tax rates and maybe old person higher personal allowance, not sure age etc. This seems like an overall tax saving between the two parties. paying a divi you would sacrafice the 16k tax deductable expense. savings are probably doubtful.
its a little minefield, not sure how big your company is etc but i assume you have an accountant. Give them a call and they will assess your situation better than we can as they will have most of your details and know your background etc.
Hope this help,
Forgive typos, not proof reading
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Forgive the typo's I generally do not proof read. Just lazy I guess!
