Paying someone else for tax relief.

Not an issue at the mo but.

If wife got made redundant could I book her down as working with me and pay her £11,500 that I would have earned and at the same time reduce my earnings by £11,500.

EG...I have a round worth £40,000 per year done 12 times a year so pay tax on £28,500.

Could I "take" the wife with me and "pay" her £11,500 per year meaning I "earn" £28,500 per year so only pay tax on £17,000?

J and S said:

Not an issue at the mo but.

If wife got made redundant could I book her down as working with me and pay her £11,500 that I would have earned and at the same time reduce my earnings by £11,500.

EG...I have a round worth £40,000 per year done 12 times a year so pay tax on £28,500.

Could I "take" the wife with me and "pay" her £11,500 per year meaning I "earn" £28,500 per year so only pay tax on £17,000?

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Yes, BUT she needs to actually be doing work. Maybe give her a works phone and have her answering business calls whilst "working from home". If I'm right you'll also need employers liability insurance for her.

Clisty1989 said:

Yes, BUT she needs to actually be doing work. Maybe give her a works phone and have her answering business calls whilst "working from home". If I'm right you'll also need employers liability insurance for her.

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Rather than give her a works phone, just put hers through the account. With regards to her doing work, the is nothing to say how much you do or don’t pay them and how much “work they do” I agree that maybe a bit of paperwork should be done. My moms retired and I use her allowance to reduce my bill. Maybe an obvious statement but don’t let her claim any benefits (unemployment etc) In theory perfectly fine reasonable and above board to do what you are suggesting.

Last time she was out of work for 10 weeks in around 2000 the max she could claim was £30 per week I think it was.

So wouldn't be claiming.

Partnership.

If you pay her that your company will pay NI contributions. Partnership as Solarpanelcleaningltd said is the way 

What Solarpanel said

Completely above board - no employers liability - split the profits and each pay your own tax after deduction of £11,500 each and a half share of all allowable expenses.

My wife is in partnership with me, she works on tools two days a week, but your wife could do admin? Accountant does 3 tax returns, two individuals n one for partnership.

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I've always employed my wife rather than a partnership.  My accountant bill is high enough doing just one set of accounts let alone 3! Don't you find it really expensive, all you chaps in partnership? Maybe I just have an expensive accountant?

Do my own tax returns....so simple to do now.....thanks for replies partnership it is if it comes down to it.

J and S said:

Do my own tax returns....so simple to do now.....thanks for replies partnership it is if it comes down to it.

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Got any tips how to do this J and S?

Register online and if you have got all your figures for income and expenditure written down or on computer just fill out the form.

It's basically how much did you earn, how much was spent on the business so profit is so and so.

There's a lot of pages but if you answer no to a question it moves you on to the next page.

You don't have to itemise anything...it only becomes a little complicated if you have other income like property rental, foreign investments shares etc.

Ltd company 

11.5k each plus tax free dividends 

adamangler said:

Ltd company 

11.5k each plus tax free dividends 

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Dividends over £5k, I believe, attract tax. Unless the NI rules have changed then the Ltd Company will also pay NI on salaries at that level. 

Dividends are changing to 2.5k anything over 2.5k will be taxable

The ‘dividend allowance’ is due to be cut from £5,000 to £2,000 from April 2018

Part Timer said:

Dividends over £5k, I believe, attract tax. Unless the NI rules have changed then the Ltd Company will also pay NI on salaries at that level. 

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Should get 13.5 k yourself

11.5k allowance plus 2k tax free dividends.

Not sure how dividends work for an employee (partner) who is also a shareholder.

Would be worth running through all the various options with an accountant.

I did my own returns myself but going ltd sometime in the next few months due to wanting to employ and also possibly adding partner as a shareholder or employee. Although I'm still contacting accountants and mulling over all the pros and cons at the moment.

Dividends are paid as a percentage of shares. You don't need to go Ltd to add a partner, and profits can be allocated as a percentage. So if you change from sole trader to a partnership you don't have to go 50/50 on profit, you can go 99/1 if you want. 

Just be careful, in a Ltd Company even if you're the majority shareholder you are still classed as an employee for tax and NI calculations. At £157 per week you start to pay class 1 NI contributions and so does the company