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A client carried on a business through a “one-man” limited company, which has ceased trading but has retained profits. Because he is liable to higher rate tax in retirement, he proposes to gift the shares to his wife to enable her to draw dividends
My client was in employment for all of his working life and was a member of a final salary pension scheme as well as saving into some personal pension plans.
In his spare time he carried out freelance work through a limited company of which he is the director and 100% shareholder and which was established for this purpose. Because the income from his employment was sufficient for his needs the freelance income was retained in the company and is now a substantial amount.
Our client’s plan was that he would draw down the company’s retained income as dividends as required during his retirement. However having recently retired he now finds that his pensions and state pension use up the basic rate tax band. This means that there will be an additional income tax liability on any dividend income.
My client’s wife’s only sources of...
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