Paying OH a Wage

supermonkey

Hi all,

My OH has been helping with various aspects of my business and I believe it is now time to begin paying her! It will also help reduce my tax.

I have spoken to an accountant about all this, but would just like an extra opinion.

The plan is to pay a wage under 5044 so that theres no need for paye.

The Which wesbite states "If you pay them less than £110 there is no National Insurance to pay, but paying more than £95 will protect their right to a state pension. " "Class 1 Employed - If your earnings are below the earnings threshold (£110 per week) you pay no National Insurance contributions but still build up rights to benefits, provided you earn £97 a week or more – the lower earnings limit for
2010-11. "

The problem is that my OH is already self employed with a small earnings certificate. (some ebaying etc here and there). Based on the above, she would employed and would therefore build NIC without paying?

bris

You as her employer wouldn't have to pay any tax on NIC for her, but she would have to add her other earning to her salary and pay any tax and NIC over her allowance.

antrobus

supermonkey wrote: »

Based on the above, she would employed and would therefore build NIC without paying?

Yes, that's the way it works.

Your accountant (presuming that they are also your OH's accountant) will take her self-employed earnings into account when calculating how much you should pay her to achieve this objective.

supermonkey

yes, I have the min and max sensible figures already. I was just wondering how HMRC are made aware if it is not PAYE, but not on her SA. I presume she would fill in form SA102 for employment, entering the figure she earnt for the year & leaving the paye number blank (perhaps also writing a descriptive note if possible)

supermonkey

I've now given this some more thought.
I plan to pay £90 per week (4680) to keep below threshold and provide some tolerance for ther self employed income. Should she cancel her small earnings certificate? Does she fill in form SA102 for employment to advise of her earnings or is there another way HMRC are informed? Also, can I pay her a bulk payment of £3150 to cover the 35 weeks from April 2010 to now and then continue paying her the £90 a week? (I would note I only started making personal drawings in September).

supermonkey

is anyone able to confirm the post above?

thanks!

Savvy_Sue

I'll try ... but I'm not an expert!

supermonkey wrote: »

I've now given this some more thought.
I plan to pay £90 per week (4680) to keep below threshold and provide some tolerance for ther self employed income. Should she cancel her small earnings certificate?

Is this an exemption certificate? I believe that self employed earnings are treated separately to employed earnings: HMRC would confirm or deny this. Could be worth calling their new employer's helpline as they always used to be v. helpful.

supermonkey wrote: »

Does she fill in form SA102 for employment to advise of her earnings or is there another way HMRC are informed?

Pass, but see above.

supermonkey wrote: »

Also, can I pay her a bulk payment of £3150 to cover the 35 weeks from April 2010 to now and then continue paying her the £90 a week? (I would note I only started making personal drawings in September).

I think not without being liable to pay a wadge of NI: while tax is calculated over the whole year, NI is calculated on the total paid in each pay period. so if earnings fluctuate, sometimes you pay NI, sometimes you don't.

To give an example: DS2 works p/t in Uni hols. They didn't pay him for the first 2 weeks of the summer, then paid 4 weeks all at once. that tipped him over the limit for NI so he lost that.

supermonkey

Savvy_Sue wrote: »

I'll try ... but I'm not an expert!

Is this an exemption certificate? I believe that self employed earnings are treated separately to employed earnings: HMRC would confirm or deny this. Could be worth calling their new employer's helpline as they always used to be v. helpful.

Pass, but see above.

I think not without being liable to pay a wadge of NI: while tax is calculated over the whole year, NI is calculated on the total paid in each pay period. so if earnings fluctuate, sometimes you pay NI, sometimes you don't.

To give an example: DS2 works p/t in Uni hols. They didn't pay him for the first 2 weeks of the summer, then paid 4 weeks all at once. that tipped him over the limit for NI so he lost that.

thanks, very helpful.

Although if the pay is shown to cover certain weeks, then I would think the date of payment is not relevant.

Savvy_Sue

supermonkey wrote: »

Although if the pay is shown to cover certain weeks, then I would think the date of payment is not relevant.

I would not be so sure of that: in DS2's case, the payment was clearly to cover a 4 week period when they are normally paid fortnightly. I believe it was right to deduct the NI. the same happens when back payments are made at work: the sum due for NI is based on what has actually been paid in that period, even if it clearly covers a previous period, and even if no or less NI would have been due had the payments been made at the right time.

I've even had discussions with payroll about spreading backpay over more than one month to reduce the NI liability.

however, ask the new employer helpline: it's what they are there for. they always used to answer 'in theory' questions too, which is very helpful.

supermonkey

Yes, I may give them a call.

Going back to your last post, you said "if earnings fluctuate". Well they won't, it'll be the same payment for each week. The only change is the date the payments are made

Savvy_Sue

but as far as HMRC are concerned, what is relevant is not the period the payment covers but the amount paid at a particular time! so from their POV her earnings will appear to fluctuate: one large payment followed by regular payments doesn't rule out another large payment at any time.

I was really hoping one of the people who knows more than me would agree (or not!) with me - my payroll days are a few years ago!