Sole Trader to Ltd - Director's loans

[cmc68]

Hi,

My wife is looking to move from sole trader status to a limited company. She is a freelance writer with three lareg contracts and a handful of small ad-hoc ones

The plan being to pay a small salary and dividends etc. from a tax efficiency perspective

I need to check my understanding regards Director's loan accounts.

Can they be used as a mechanism to maintain steady income?

Currently as a sole trader she can 'draw' income on a monthly basis as long as money for future tax is earmarked. Waiting a year for the full dividend of profits however will not be practical.

So, allowing for my over simplifying, can you basically take money from the company via the loan account on a regular basis as long as you stay in line with expected dividends at y/e and then reconcile everything in the company accounts?

Many thanks.

Chris

[cmc68]

Thanks for the replies.

So if she moves from sole to limited, is ther anither way to release 'dividends' or profit more reglularly than at year end?

SHe isn' t in the position to hold of the income for a year,

Thanks.

Chris

[cmc68]

Thanks everyone.

I am taking the summary as we can take more regular dividends as long as we follow process.

Income is generAlly fairly steady based on three main contracts so p&l will be easy enough to accurately calculate.

Quarterly should be doable too.

Chris

[cmc68]

Thanks all. I'm learning so much from this discussion.

The suggestion put to me today was that frequency is not so much the issue as pattern. So in other words vary the value of the dividends and the frequency.

All that said I think quarterly will be fine alongside the basic salary.

Plus we will be making a loan to the business to fund an acquisition and early cash flow.

So between those two I'm sure we can manage our family cash flow.