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Hi all hope you can help!
Currently divorced father of 2, pay my ex wife circa £700 per month via CMS calculations, I pay this direct to her without fail every month and a whole we are reasonably amicable.
However I will soon go from being on PAYE salary of £70K per year and a 10% shareholder and Director to 100% shareholder and Director paying myself a basic PAYE salary of £12k per year with a yearly dividend if I turn the business profitable once again.
How will the CMS calculate this to start with and how do I prove my drop in income from £70k to £12k before a dividend is hopefully paid at year end, I am aware a dividend is classed as earnings but that wouldn't be in the immediate future.
Hope this makes sense, any help greatly appreciated.
Dave
hi,
you will have to phone/write to CMS and tell them your now a director of limited company etc and give info about it.
do you have an accountant? what you do is after your annual accounts are sorted out by your accountant, you ask them what your income was for the tax year, and they should tell you your salary and dividends amount. if possible try get them to send you info in letter format. for me email was good enough. and you send this info to CMS. with me i was just paying myself salary in dividends. thats it. CMS did variation on dividend amount and told me what i have to pay.
Thanks for the reply. Yes have an accountant it's just more the transition from high salary to low salary and if CMS make an immediate adjustment to reflect this before the year end etc? Were you in the same position?
Be careful. Your reduction to £12K salary will result in a very small CMS payment to your ex of Circa £85 per month. This will mightily annoy your her, it did mine, even though I was trying to get my dividends added at the same time but was a different CMS department and they did not catch up till later.
The result was my ex threw the kitchen sink at me and took me to tribunal for hidden income, they look into your accounts etc, etc.
Plus, if you declare 12K and then at the end of the year when you pay yourself a dividend and it is over 25% of your basic(which I assume it will be), you will be back assessed for the previous year and have the underpayment added to the following year. It took my maintenance payments from £567 per month to £1077 in clawing back the underpayment.
So as said, be very careful in your decisions.
Hi, thanks for the reply, just the info I was looking for as I'm always assessed a year in arrears now anyhow as how my assessment date falls in March just before the tax year so probably best to be honest up front and try and come to an amicable arrangement before it bites me in the [censored] as it has you!! She will definitely throw her toys out the pram and make life very difficult!!
Thanks
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