Tim said:
Exactly. But my point was that you can be (fairly) sure that you won't be
around *forever*. If the company constantly produces a profit in excess of
around £35-40Kpa, then you'd simply be storing up the retained profits for
someone else to spend after you die.
Why not, therefore, distribute some (/all?) of the profits in excess of
£35-40Kpa, and enjoy them yourself - while you are still alive??
I agree with all of the above. That's what I do
Reasons for retaining profits might be
- cash for future capital investment
- temporarily minimising your income (e.g. for child maintenance
assessment purposes, or some similar reason like an expected court
case with an income-related fine, or planning to leave the UK)
- keep income in a lower tax bracket
Also, let's say you plan to marry (strange thing for me to suggest
given previous comments

). A few years down the road, your wife will
in effect acquire a 1/2 stake in all your assets including the
business, so, in for a penny in for a pound, you may as well give her
shares in the business (or transfer some of yours to her, it is free
of CGT but you pay 0.5% stamp duty IIRC) and then she can draw out a
load of dividends as well, making full use of her basic rate tax
bands. But then you might have an even messier divorce because she can
easily destroy your livelihood if she wants to. Especially as her
basic rate bands are unused, i.e. she isn't working, i.e. she almost
certainly married you for financial support. Oh well... forget that
one
