PAYE and business income - possible to combine tax allowances?

antilles

Thinking of starting a business around my 9-5 job for extra income. I work full time (38 hours) but my wife only works 14 hours per week, so earns a lot less than me. I understand that I would pay tax for the business after my PAYE earnings. As I am not far off the higher rate of tax in my job, earnings from the business may push me into the higher bracket.

If I start a business is it possible to combine mine and my wife's allowances so I could pay less tax on the business earnings, and take advantage of the fact that she earns a lot less than I do?

fengirl_2

No, you cannot combine your tax free allowances - these are personal allowances and women fought long and hard for independent taxation!
There are two things yu could do:
1. Take your wife into partnership and so split the profit between you
2. Take your wife onto the payroll of the business - she could only be paid for work actually done.
You really need to take professional advice as to which is the best option for you.

antilles

I thought that may have been the case. That's pretty a rubbish tax rule if you ask me, because I decide to earn extra income for the family I end up pushed into a higher tax bracket.

The partnership idea sounds like it could work though.

TM1976

If you set up a Ltd co and your wife owns the shares you can pay the profits to your wife, this will use her tax allowance and avoid any NI for her. There will be professional fees associated with this though so it depends how much you are going to make as to whether it's worthwhile.

As Fengirl says professional advice is probably a good idea.

fengirl_2

It's not a rubbish rule if you are a married woman who wants to keep her financial affairs private!

antilles

fengirl wrote: »

It's not a rubbish rule if you are a married woman who wants to keep her financial affairs private!

I suppose not - but there should be a choice!

Caroline73_2

Your wife should be on over £4200 a year (based on minimum wage at 14 hrs per week) so is actually not far off paying tax herself anyway. If you need extra income coudn't your wife just work more than 14 hours?

TM1976

Caroline73 wrote: »

Your wife should be on over £4200 a year (based on minimum wage at 14 hrs per week) so is actually not far off paying tax herself anyway. If you need extra income coudn't your wife just work more than 14 hours?

Potentially still worthwhile for the OP as he can use his wife's 20% rate where as he would have to pay 40% tax.

antilles

Caroline73 wrote: »

Your wife should be on over £4200 a year (based on minimum wage at 14 hrs per week) so is actually not far off paying tax herself anyway. If you need extra income coudn't your wife just work more than 14 hours?

The business I am starting is based around my I.T. skills which the missus doesn't have, it's something I can do a couple of evenings a week which avoids her having to do more hours - as we're already paying a childminder for 2 days.

As suggested in the previous post this is likely to push me into a higher tax bracket so it would be better if I could take advantage of her lower tax status.

olly300

antilles wrote: »

I suppose not - but there should be a choice!

The reason there is not a choice is due to it would be more difficult to administrate and abusive relationships.

antilles

olly300 wrote: »

The reason there is not a choice is due to it would be more difficult to administrate and abusive relationships.

Plus it benefits the taxman as well as he gets more loot