£800 tax bill for £9k income - too much?

Rolo_Tomasi

waqasahmed wrote: »

I dont know how true this is, but apparently you can also call your accountants bill an expense

An accountants bill for preparing accounts is an allowable expense but you do not use one so this is not applicable. However it did get me thinking - do you have any other income (you say in your original post you are a housewife). If not, perhaps you should set yourself up as a self employed book-keeper. You could charge your husband £1000 per year for doing his book-keeping and preparing his accounts which would reduce his tax bill by £280.

You can earn up to about £5000pa without paying any tax or nic.

Elaine_Wilson

Be careful about calling yourself a bookkeeper. You will possibly be liable to register under the Money Laundering regulations. This costs £130 for next year.

You are his secretary, aren't you?

ragz_2

Rolo_Tomasi wrote: »

An accountants bill for preparing accounts is an allowable expense but you do not use one so this is not applicable. However it did get me thinking - do you have any other income (you say in your original post you are a housewife). If not, perhaps you should set yourself up as a self employed book-keeper. You could charge your husband £1000 per year for doing his book-keeping and preparing his accounts which would reduce his tax bill by £280.

You can earn up to about £5000pa without paying any tax or nic.

I did consider this but decided against because of all the extra paperwork. I can't just do my husband's books as that's make him my employer and would get really complicated and I'm not competent enough (obviously) to actually do anyone else's yet!
But I am thinking about actually taking a course in bookkeeping and doing it for a living when the kids are a little older.

Pennywise

It's easy for your OH to set up an employers PAYE scheme so that he can pay you a reasonable wage for the hours you work, i.e. books, admin, telephone answering, etc., which can usually add up. Every £100 he pays you will save him £28 in tax and NIC. HMRC do free local courses on payroll, so it shouldn't be too much of a burden on you to learn how to do the form filling, especially if you're not going to earn over ~ £5.7k there'll be no tax nor NIC deductions to work out anyway making it even easier.

Alternatively, think about becoming a partner with your OH - then the profits can be shared equally between you, meaning no tax for either of you based on £8k of profits. The downside is a personal tax return for you and a partnership tax return, both of which should be easy for a simple business. As long as your OH is insured and isn't racking up debts you can't afford, then personal liability of you both shouldn't be a problem.

If your household income is so low, I presume he is claiming working tax credits. Are you aware that tax relief and working tax credits could mean that he could buy a van at no cost, because it would reduce his tax bill and increase his tax credits award (for two years). The sums are quite remarkable but it is true - he gets 100% tax relief on a van, so that amounts to a 28% reduction in his tax and NIC bill, and his taxable income is reduced by the cost of the van in the year of purchase, so that increases his tax credits award. As long as his taxable income for the following year isn't more than £25k higher than for the year of purchase of the van, the tax credit award stays at the higher rate for the second year as well, taking his combined tax relief and increased tax credits to around the cost of the van - so basically, HMRC pay for his van. The same works for other equipment purchases.

This is why you need an accountant. People say that you don't need an accountant if your income is low, but in a lot of cases, especially now we have 100% capital allowances and working tax credits, it is the lower earners that can benefit far more by having proper professional advice rather than cobbling it together on their own and missing important opportunities.

Remember that tax credit application can't be backdated more than 3 months, so you need to make your initial claim asap if you're not already in their system as a claimant. Even if you earn too much to be awarded any tax credits, it is still worth making a claim, even though you are due nothing - HMRC helplines tell you not to bother "wasting your time" to fill out the form, but the point is that once you have made a claim, even if the award is "nil" a change in your circumstances can lead to a back-dated award beyond the three months, which is especially helpful for self employed who don't know what equipment they may buy or whether their profits will fall.

ragz_2

Pennywise wrote: »

It's easy for your OH to set up an employers PAYE scheme so that he can pay you a reasonable wage for the hours you work, i.e. books, admin, telephone answering, etc., which can usually add up. Every £100 he pays you will save him £28 in tax and NIC. HMRC do free local courses on payroll, so it shouldn't be too much of a burden on you to learn how to do the form filling, especially if you're not going to earn over ~ £5.7k there'll be no tax nor NIC deductions to work out anyway making it even easier.
Thanks for explaining it, I will consider this. We do get quite a lot in benefits so I don't want to be earning too much but I guess a few hundred a year isn't too bad. Aren't there laws about employing your wife for tax purposes though?

Alternatively, think about becoming a partner with your OH - then the profits can be shared equally between you, meaning no tax for either of you based on £8k of profits. The downside is a personal tax return for you and a partnership tax return, both of which should be easy for a simple business. As long as your OH is insured and isn't racking up debts you can't afford, then personal liability of you both shouldn't be a problem.
Can I do that, even though I don't really do any of the work? Again won't HMRC consider it "cheating"? Great idea if it'll work though! Also, what about the working tax credit, he has to be working 30 hours a week to get that, they won't belive him if his incom'es only 4 or 5k?

If your household income is so low, I presume he is claiming working tax credits. Yes we get working tax credit and child tax credit though both are currently based on a "guessed" income for this year.
Are you aware that tax relief and working tax credits could mean that he could buy a van at no cost, because it would reduce his tax bill and increase his tax credits award (for two years). The sums are quite remarkable but it is true - he gets 100% tax relief on a van Does that have to be a new van?, so that amounts to a 28% reduction in his tax and NIC bill, and his taxable income is reduced by the cost of the van in the year of purchase, so that increases his tax credits award. As long as his taxable income for the following year isn't more than £25k higher than for the year of purchase of the van, the tax credit award stays at the higher rate for the second year as well, taking his combined tax relief and increased tax credits to around the cost of the van - so basically, HMRC pay for his van. The same works for other equipment purchases.
I kind-of followed that bit...

This is why you need an accountant. People say that you don't need an accountant if your income is low, but in a lot of cases, especially now we have 100% capital allowances and working tax credits, it is the lower earners that can benefit far more by having proper professional advice rather than cobbling it together on their own and missing important opportunities.
I'm seriously considering getting one but we really can't afford the fees at the moment, maybe next year...

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Thanks so much for taking the time to post all that, must have taken ages and I really appreciate the help.