We were recently asked by Contractor UK to respond to a question asked by one of their readers:

Contractor’s Question: I plan to wind up my four-year-old PSC and a Members Voluntary Liquidation (MVL) looks best, as I am solvent with cash reserves excess of £25,000. But how best to maximise my salary/dividends before my October year-end?

In 2016/17, I paid myself a monthly salary of £671 so can I, for the next quarter, take three equal monthly salary payments up to the NI threshold? So, £2,720 salary payments in July, August and September (total £8,160), hopefully without raising a red flag to HMRC?

Or would a better tax strategy be to keep the monthly £671 payments, then make the rest up with dividends to £45,000 to take advantage of the 7.5% tax liability before end of October, then look to liquidate using Entrepreneurs’ Relief (10%) on the remaining cash reserves?

To see the complete response from Steve Parker, Partner and Gareth Wilcox, Director, click on the link below:

Contractor UK: http://www.contractoruk.com/mvl/how_boost_income_winding_my_company_mvl.html