Employing OH.

bylromarha

OH has been running his own successful business for past 5 years. He looked into employing me, but decided it wasn't worth the hassle then.

I am now a stay at home mum and he no longer has the time to look for these things...and I don't have a clue where to start as i've always kept my head out of the business side of things...we both value our marriage too much for me to get involved!

We're assuming we'll get to keep more money in the household if he does employ me. Is this correct? What can my max wages be?

Can anyone point me in the direction of some websites which will clearly detail the rules about this/thresholds for tax and anything else we need to know if I were to be employed by the company? Incidentally, I do work for the business, just don't get financial recognition for it!

thanks

Murtle

try http://www.hmrc.gov.uk/ or speak to your accountant as they should be able to guide you

M

WHA

Unless you are a business partner or director, you can only be paid a reasonable market rate for the hours you do. So if you did (and can prove) 10 hours per week for basic admin, you could say £75 per week was reasonable - i.e. 10 hours at £7.50 per hour.

A benefit of doing this is to re-allocate your OH's profits (probably taxed at a higher rate and maybe with NIC) from him, to you to use up your annual allowance and lower tax bands.

A further benefit is to keep your NIC history up to date to maintain your eligibility for state benefits as long as you earn over the NIC threshold.

The downsides are the admin - he'll need to register with HMRC as an employer and calculate tax/nic on your wages, pay over the tax/nic to the HMRC and complete payslips, year end payroll returns etc. Of course, if he already employs staff, he has to do all this anyway.

If you became a partner or director, your "earnings" could be a lot higher if you were actually participating in the business rather than just being a "hired help" - i.e. even if you didn't have the same skills and experience to "do his job", you could argue your contribution towards administration, marketing, strategy, etc was worth more than just an average hourly rate.

I would definately talk to your accountant about the whole picture - this is an area where the HMRC take great interest and often challenge your actions - but if done correctly, the benefits are usually worth it.

CIS

For NI purposes, you'd need to earn over #84 a week to gain a qualifying year, but if this isn't feasable you can pay voluntary class 3 NI (#7.55 p/w) or rely only on your HRP (Home Responsibilities Protection) to keep your Basic Pension ticking over.

Savvy_Sue

WHA wrote:

The downsides are the admin - he'll need to register with HMRC as an employer and calculate tax/nic on your wages, pay over the tax/nic to the HMRC and complete payslips, year end payroll returns etc. Of course, if he already employs staff, he has to do all this anyway.

It's not that much by way of admin, IMO. I used to do a weekly payroll, manually, and found the Inland Revenue guides were not hard to follow, especially for the straightforward people only doing one job (I sometimes needed a cup of coffee and a wet towel round my head for the complicated people!)

What I'm saying is that I wouldn't be put off the idea by the admin, even if you are going to be the only employee, because if this is your only source of income it should be a doddle. As a small employer you can pay what you owe HMRC quarterly, if indeed you owe them anything!

bylromarha

Few more details.

OH isn't on higher rate tax. i would be the companies first employee, so it'll be a brand new world of payroll if we did do this.

Will look into becoming a director too.

We don't have an accountant as such, just a woman who does his tax return.

Reality is that I'll be starting on maternity pay pretty soon, so he can't pay me until those 6 months are up anyway...just about enough time for me to get used to having 2 kids and reading all the info available.