{"id":216,"date":"2021-02-15T02:28:59","date_gmt":"2021-02-15T02:28:59","guid":{"rendered":"https:\/\/guide.no-worries.co.uk\/?post_type=ht_kb&#038;p=216"},"modified":"2025-11-06T10:06:27","modified_gmt":"2025-11-06T10:06:27","slug":"additional-shareholders","status":"publish","type":"ht_kb","link":"https:\/\/guide.no-worries.co.uk\/index.php\/knowledge-base\/additional-shareholders\/","title":{"rendered":"Additional Shareholders"},"content":{"rendered":"\n<p class=\"has-theme-default-color has-text-color wp-block-paragraph\" style=\"font-size:22px\">This guide provides details for adding your spouse to your limited company and highlights some of the key considerations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Higher earning clients often find they have retained earnings building up in their company year after year. They pay themselves up to around the higher-rate threshold, but would like to be able to extract more of the retained earnings out of the company without significant tax implications. Currently, there are a number of options available, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Set up a stakeholder pension fund for yourself. Your limited company can make contributions to the fund and it is tax-deductible for the company. If you would like this set up, we can put you in contact with someone who specialises in pension funds for limited company contractors.<\/li>\n\n\n\n<li>Set your partner up as a shareholder of the limited company and pay them dividends. This is often called \u201cincome shifting\u201d. It can be legitimate where there is genuine share ownership, but arrangements can be challenged by HMRC under the <strong>settlements legislation<\/strong> if they are primarily designed to divert income without transferring real rights and risks.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Bear in mind:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Another shareholder will now own part of your business.<\/li>\n\n\n\n<li>Each time you declare a dividend, all shareholders need to be paid a dividend according to the portion of shares that they hold. If a different class of share is gifted, different dividends can be declared at different times. Issuing different classes of shares can be useful; however, care should be taken because HMRC may attack arrangements where \u201calphabet\u201d shares, dividend waivers or similar devices are used mainly to route income to a lower-taxed spouse.<\/li>\n\n\n\n<li>Dividends paid to shareholders need to be paid directly to the shareholder \u2013 it is really important these dividends do not find their way back to you, and you aren\u2019t seen to benefit in some way from this arrangement.<\/li>\n\n\n\n<li>If\/when you close down your limited company, the final distribution again needs to be split between all shareholders according to their shareholdings (regardless of class). To claim <strong>Business Asset Disposal Relief<\/strong> (formerly Entrepreneurs\u2019 Relief), a shareholder must usually be an officer or employee for at least <strong>2 years<\/strong> and meet the 5% share\/vote tests on qualifying disposals.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Key rates for 2025\/26<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For <strong>2025\/26<\/strong> (6 April 2025 \u2013 5 April 2026), the main figures are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Personal Allowance:<\/strong> <strong>\u00a312,570<\/strong>. (Tapers away from \u00a3100,000 and is nil by \u00a3125,140.)<\/li>\n\n\n\n<li><strong>Dividend Allowance:<\/strong> <strong>\u00a3500<\/strong> tax-free per person.<\/li>\n\n\n\n<li><strong>Dividend tax rates (on amounts above the \u00a3500 allowance):<\/strong> <strong>8.75%<\/strong> (basic), <strong>33.75%<\/strong> (higher), <strong>39.35%<\/strong> (additional).<\/li>\n\n\n\n<li><strong>Higher-rate threshold (England, Wales &amp; NI):<\/strong> <strong>\u00a350,270<\/strong> total income. (Basic-rate limit \u00a337,700 + Personal Allowance \u00a312,570.)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Note: Scottish income tax bands differ for <strong>earned<\/strong> income, but dividend rates are UK-wide. The interaction can vary for Scottish taxpayers.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Your partner does not have any other sources of income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your partner has no other UK income (e.g. salary, interest, rent), there may be a clear tax benefit to them being a shareholder.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Using the Personal Allowance <strong>\u00a312,570<\/strong> plus the <strong>\u00a3500<\/strong> dividend allowance, your company could distribute up to <strong>\u00a313,070<\/strong> of dividends to your partner with <strong>no tax<\/strong> payable (assuming no other income).<\/li>\n\n\n\n<li>If your company were to distribute <strong>\u00a350,000<\/strong> of dividends to your partner, the tax would be: \u00a350,000 \u2212 \u00a312,570 \u2212 \u00a3500 = <strong>\u00a336,930<\/strong> taxed at <strong>8.75%<\/strong> = <strong>\u00a33,231<\/strong> (rounded). Because total dividend income exceeds <strong>\u00a310,000<\/strong>, a Self Assessment return is required.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Your partner does have other sources of income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your partner does have other income, the benefit depends on how much basic-rate band remains.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example 1:<\/strong><br>Tom has his own limited company and would like his partner, Meg, to be a shareholder so the company can pay her dividends. <strong>Meg earns \u00a330,000 (gross)<\/strong> in a permanent job and has no other income.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are 2 options here;<\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li>The company could pay Meg dividends up to the <strong>\u00a3500<\/strong> dividend allowance with <strong>no dividend tax<\/strong>. (If dividends stay within the \u00a3500 allowance, there\u2019s nothing to tell HMRC.)<\/li>\n\n\n\n<li>If Tom wanted to pay out further funds and Meg is happy to pay some extra tax, then to <strong>stay within the basic-rate band<\/strong>, Meg could receive up to <strong>\u00a320,770<\/strong> of gross dividends in the year (this keeps her total income at \u00a350,270). Tax would be <strong>\u00a320,270 \u00d7 8.75% = \u00a31,774<\/strong> (rounded), because the first \u00a3500 falls within the dividend allowance. If her total dividends exceed <strong>\u00a310,000<\/strong>, a Self Assessment return is required.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example 2:<\/strong><br>Meg earns <strong>\u00a350,000<\/strong> a year through her permanent job, and has no other income.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In this situation, the only clear benefit is for the company to pay Meg <strong>up to \u00a3500<\/strong> in dividends tax-free (the dividend allowance). Anything above that generally pushes her over the <strong>\u00a350,270<\/strong> higher-rate threshold. Roughly the next <strong>\u00a3270<\/strong> (after the allowance) would be taxed at <strong>8.75%<\/strong>, and amounts beyond that at <strong>33.75%<\/strong>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>IMPORTANT<\/strong><\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li>While we can give you advice and help you work out the appropriate level of dividends to distribute from your limited company, it is your responsibility to <strong>track the payments<\/strong> the company makes to your partner.<\/li>\n\n\n\n<li>Any dividend payments made to your partner must be <strong>used solely by them<\/strong> \u2013 we recommend paying the dividends into their own personal bank account. Do not use your partner as a way of extracting dividends from your company that eventually end up finding their way into your hands.<\/li>\n\n\n\n<li>Be cautious with different share classes and <strong>dividend waivers<\/strong> \u2013 HMRC can invoke the <strong>settlements<\/strong> rules where arrangements look like a device to divert income. Get advice first.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">If you would like to arrange to have your partner set up as a shareholder in your limited company, please <strong>contact us<\/strong> and we\u2019ll arrange this for you.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This guide provides details for adding your spouse to your limited company and highlights some of the key considerations. Higher earning clients often find they have retained earnings building up in their company year after year. They pay themselves up to around the higher-rate threshold, but would like to be&#8230;<\/p>\n","protected":false},"author":2,"comment_status":"open","ping_status":"closed","template":"","format":"standard","meta":{"footnotes":""},"ht-kb-category":[18],"ht-kb-tag":[],"class_list":["post-216","ht_kb","type-ht_kb","status-publish","format-standard","hentry","ht_kb_category-core-info"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Additional Shareholders | No Worries Help Centre<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Additional Shareholders | No Worries Help Centre\" \/>\n<meta property=\"og:description\" content=\"This guide provides details for adding your spouse to your limited company and highlights some of the key considerations. 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