Making use of partners tax free allowance

missm29

Other half is self employed as a sole trader, i don't work at home with children, however i do all the paperwork for the business, someone said that he could pay me a wage as the first 5k/6k? isn't taxable. Would i need to pay national insurance? do we need to let the tax office know? would i need to do an annual tax return for myself? does he need to actually transfer the money into an account in my name? do i make sense?

Wookey

missm29 wrote: »

Other half is self employed as a sole trader, i don't work at home with children, however i do all the paperwork for the business, someone said that he could pay me a wage as the first 5k/6k? isn't taxable. Would i need to pay national insurance? do we need to let the tax office know? would i need to do an annual tax return for myself? does he need to actually transfer the money into an account in my name? do i make sense?

You can certainly do the work at home for him as long as you are paid a rate commensurate with the time/work involved. There are some very small NI contibutions involved when you go over certain amounts and i'm sure someone will post those up shortly. It is a perfectly legit way of operating and you should look into it as it will effectively bring in 5k more into the house which is virtually tax free.

fengirl_2

Anything under £97pw is free of NIC and tax. But, as previous poster has said, be very careful about this. The rate must be the going rate for the job and the hours must be reasonable. The money must actually be paid to you - either withdrawn in cash, or transferred by cheque. Don't attempt to make a retrospecive payment as this will indicate to HMRC that this is not proper employment. You would not need to inform HMRC if you were paid under the £97pw.

ceeforcat

fengirl wrote: »

Anything under £97pw is free of NIC and tax. But, as previous poster has said, be very careful about this. The rate must be the going rate for the job and the hours must be reasonable. The money must actually be paid to you - either withdrawn in cash, or transferred by cheque. Don't attempt to make a retrospecive payment as this will indicate to HMRC that this is not proper employment. You would not need to inform HMRC if you were paid under the £97pw.

Actually you do have to inform HMRC and register as an employer if you are paid £90 per week or more (£390 per month) as, above these amounts, you receive credits for NIC even though you do not actually pay contributions until earnings hit £105. You are required to do an end of year return in order that HMRC are aware of the credits. But why not do it? Have your husband register as employer and record your earnings. If he pays you £90 per week (must be commensurate with job and physically paid - may be better to do monthly) each tax year will count towards your state pension entitlement.

missm29

Registering as an employer sounds complicated and even more paperwork, i will speak with our accountant. thanks

Pennywise

missm29 wrote: »

Registering as an employer sounds complicated and even more paperwork, i will speak with our accountant. thanks

Maybe, but your OH stands to save £1,512 in tax?NIC each year by paying you a formal wage of £5,400 per year (if you do enough hours to justify it). Not only that, but you will be accruing "credits" towards state benefits, including state pension, and you will be entitled to statutory sick pay and statutory maternity pay. I'd say that a bit of admin and bureaucracy is certainly worth it for that kind of benefit. If you don't want to do it yourself, I'm sure that his accountant would do the paperwork for £50-£100 per year which still gives you quite a saving. I'm a little surprised that his accountant hasn't already suggested this - it is fairly standard/normal for a sole trader business.