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  • FIRST POST
    philthetiler
    avoid higher rate tax!
    • #1
    • 7th Nov 08, 9:26 PM
    avoid higher rate tax! 7th Nov 08 at 9:26 PM
    Hello, I am a self employed tiler working sub-contract for a large tiling contractor, i work under a contract for service agreement,
    i send them an invoice every 2 weeks to a month and work for them virtually all year round cos im so good at my job!! anyway its half way through the year and i've earned about 35k and i am going to get stung big time for the next six months;
    i am 28 married with four children 7 and under, my wife does not work(try as i might make her)

    my Question is: can my wife set up a ltd company and pay me to work on her behalf, thus possibly using a seperate allowance on her income and avoiding the higher rate of tax
    would this be possible/legal


    very helpfull site
    thanks

    Mr Tiler
Page 1
  • spursboy
    • #2
    • 14th Nov 08, 4:14 PM
    • #2
    • 14th Nov 08, 4:14 PM
    Hello, I am a self employed tiler working sub-contract for a large tiling contractor, i work under a contract for service agreement,
    i send them an invoice every 2 weeks to a month and work for them virtually all year round cos im so good at my job!! anyway its half way through the year and i've earned about 35k and i am going to get stung big time for the next six months;
    i am 28 married with four children 7 and under, my wife does not work(try as i might make her)

    my Question is: can my wife set up a ltd company and pay me to work on her behalf, thus possibly using a seperate allowance on her income and avoiding the higher rate of tax
    would this be possible/legal


    very helpfull site
    thanks

    Mr Tiler
    Originally posted by philthetiler
    In simple terms my thoughts are highly illegal and it could cost you a lot more in longer term in penalties from HMRC.

    The best ways to avoid higher rate tax are things like pension contributions etc. Alternatively if you go and see an accountant you may be wise to set up a Limited Company, pay yourself a basic salary and then get money out of the company via dividends. (HEALTH WARNING - SEEK EXPERT ADVICE IN THIS AREA!)

    Other options to save yourself exposure to large tax bills are to register under the CIS (construction industry scheme)? It would work alot better for you as you would have tax deducted at source. If I were you I would raise it with the Company you are sub contracting under to see if they have any other individuals whom they pay via this.

    Alternatively I would suggested either asking them if you can be a PAYE employee or simply opening up a second bank account and putting a % of every invoice in there (20% of first say 40,000 a year and 40% on everything else).

    As I said I would speak to the company whom you sub contract for or have a look round on the internet/ HMRC website regarding the CIS scheme.
  • toby puppy
    • #3
    • 14th Nov 08, 4:28 PM
    • #3
    • 14th Nov 08, 4:28 PM
    If your wife was actually doing your paperwork (by this I mean keeping proper bookkeeping records), providing she has no other sources of income, you could charge wifes wages in your accounts therefore using her annual personal allowance - currently £6035 for 2008/09 - best to discuss with your accountant.

    As previous poster mentioned - registering for CIS tax then you would have 20% deducted as you go, accumulating a large chunk of tax over the year.

    The company will probably rather keep you as a contractor as opposed employee because then don't have to pay holiday pay/sick pay etc.
    Last edited by toby puppy; 14-11-2008 at 4:32 PM.
  • lic
    • #4
    • 14th Nov 08, 4:38 PM
    • #4
    • 14th Nov 08, 4:38 PM
    Why not educate your kids privately, have any medical ailments they have/get in the future treated privately, pay for them to use private recreational facilities?
    That way they can evade using taxpayers money to pay for their development.
    Its a bit like what you are proposing, but in reverse! Sounds great dosen't it?
    Lic.
  • jennifernil
    • #5
    • 15th Nov 08, 3:42 PM
    • #5
    • 15th Nov 08, 3:42 PM
    I think you should be glad you have such a good income, and pay your taxes like (most of) the rest of us do!

    One way to minimise your tax is to have your savings in your wife's name as she can set her unused tax allowance against any interest.
  • dunstonh
    • #6
    • 15th Nov 08, 5:08 PM
    • #6
    • 15th Nov 08, 5:08 PM
    Your are self employed so you are going to get a lower state pension than an employed person so why not take advantage of higher rate tax relief and do some pension contributions?
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • Merlin Accounts
    • #7
    • 15th Nov 08, 6:12 PM
    • #7
    • 15th Nov 08, 6:12 PM
    my Question is: can my wife set up a ltd company and pay me to work on her behalf, thus possibly using a seperate allowance on her income and avoiding the higher rate of tax
    would this be possible/legal


    very helpfull site
    thanks

    Mr Tiler
    Originally posted by philthetiler
    To answer your very specific question, yes your wife could set up a Ltd Company and employ you. Of course any wages paid to you in excess of 105 pw would be subject to PAYE & NIC (including employers NIC). She would have to pay you holiday pay, take out employers liability insurance, public liability insurance and, of course, register the company with HMRC as a sub-contractor in the construction industry. Her company would be the one billing the people the work is done for. She could then take a wage herself from the company, alongwith dividednds on any after tax profits.

    You could easily avoid higher rate taxes doing it this way.
    NB I am not saying this is my recommendation, I'm merely answering your question!
  • hopon
    • #8
    • 15th Nov 08, 7:16 PM
    • #8
    • 15th Nov 08, 7:16 PM
    Why not educate your kids privately, have any medical ailments they have/get in the future treated privately, pay for them to use private recreational facilities?
    That way they can evade using taxpayers money to pay for their development.
    Its a bit like what you are proposing, but in reverse! Sounds great dosen't it?
    Originally posted by lic
    I think you should be glad you have such a good income, and pay your taxes like (most of) the rest of us do!

    One way to minimise your tax is to have your savings in your wife's name as she can set her unused tax allowance against any interest.
    Originally posted by jennifernil
    You know I could've sworn I'd come on to moneysavingexpert. You know, the site where people HELP each other to increase their own wealth and prevent wasted expense. Their is no obligation to setup your affairs to pay the most tax possible and as long as you stay the correct side of the legislation any accountant worth the name should be helping you to minimise the bill by any means possible.

    Going back to the OP, the best method for you depends on your personal circumstances - if you earn 70k this year for example do you need it all for normal living costs etc? Could you put any in to personal pensions to get the 40% tax relief? Staying self employed and getting hammered for 40% tax on 30k is crazy so going ltd would almost certainly make the most sense, from there whether you pay salary and/or dividends to your wife depends on how much you can justify her involvement and how far you wish to push things.
    ..........Insert amusing tagline here..........
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