putting business in wifes name?

diannecro

Hi thanks to anyone who can help with this query, sorry if its abit long!
My husband is employed for 30 Hours a week , and pays tax at 20% also has a pension from navy taxed at 20% this totals before tax about £28k .
He has a small sole trader business, carpet cleaning abit of property maintenance, which he fits round his normal job, to be fair the accounting side of this is not his strong point so I try to sort out each december, this december the profit came in at £7k consequently higher tax £1500 and didnt realize would have to pay following years as well, have sorted this with hmrc and spread the payments.
The question is usually the profit is nearer £5k, I Currently dont earn anywhere near my taxable allowance could the business be put in my name or could my husband make me a partner and how?








3

agrinnall

Can you just clarify something, is the total of the employment and pension £28K or is that just the pension? If it's both together then £7K of self employment earning won't push him into higher rate tax, you are not taking into account the personal allowance which means that higher rate tax isn't paid until earning £42K.

chrismac1

I think diane means higher basic rate tax, plus NI, on the extra £7,000. This could have potentially been avoided by running the business as a partnership and having diane take 100% of the profits.

Pitfalls of this are:

1. Unlimited personal liability for both of them in the event of business failure.
2. Two extra tax returns and quadrupled penalties in the event of late filing.
3. Potential income shifting challenge from HMRC.

However, most people when looking at these risks think that saving £1,500 in tax per year is worth it.

chrismac1

There is another option which could get you a tax rebate right now, prepare for general wailing and gnashing of teeth from the HMRC folk who hang out around here.

It sounds to me like you have a t least some form of active participation in this business. For a kick-off you are sorting out the accounts and tax and saving your husband maybe £400 plus VAT in accountancy fees. Depending on how much else you do, there is clearly a case for putting a salary to you through the books of his business.

This needs to be justified on economic grounds, and I recommend obtaining external evidence if possible. For example I have a client whose wife is active in fixing up his schedule as a jobbing builder, including some negotiating of terms and conditions. I have a note on the file of this, and the relevant parties to call in the event of a challenge from HMRC with respect to her salary.

In the event you can justify one of £443 per month or more, and you register the business as an employer, you'd then get a credit towards state pension for the tax year - too late for 2010-11 but not for 2011-12.

diannecro

Thanks for your replys, the 28k is employment of 18200 and pension of 10k
Both separately taxed, then after all expenses etc the self employment brings in roughly 5k to 7k , so not a huge amount and once we took of tax even less.
I currently get paid about 1200 a year for general admin .for this I haven't declared
myself self employed, should I?
I earn 2k a year part time at moment.

Mikeyorks

diannecro wrote: »

Thanks for your replys, the 28k is employment of 18200 and pension of 10k
Both separately taxed, then after all expenses etc the self employment brings in roughly 5k to 7k , so not a huge amount and once we took of tax even less.

In which case this :

this december the profit came in at £7k consequently higher tax £1500

- is wrong. There is no 'higher tax' - the £1500 is the £7k (£7500?) at 20% which is the basic rate of tax. All the personal allowances will be given at the PAYE sources (employment and / or pension) so nothing is left over to set against the self employment.