Can we be more tax efficient?

Ambit_miffed

Hi all,

I'm after some advice, which i think i need to get from an accountant but thought to try here first.

I am employed full time, and earn £39k basic, plus an annual bonus of around £4k which just takes me over the 40% tax threshold after todays budget

My wife is employed part time and earns about £8k a year.

We are both partners in a small business that makes about £10k profit a year.

I'm looking for the most tax efficient way to split the £10k profit. My initial thought is to give it 100% to my wife. Is this allowed as we are partners - should i be taking at least something? would HMRC be confused by this, or can it be quite a natural arrangement?

Secondly, would we be better off going down a different route? such as ltd company and taking dividends from the profit? - i'm a little unsure how this works, and for the £10k profit we have, and cost savings might be negated by a need to have a proper accountant to do our books and file all the returns etc

any advice is greatly appreciated.

cheers

antrobus

Ambit_miffed wrote: »

...

We are both partners in a small business that makes about £10k profit a year.

I'm looking for the most tax efficient way to split the £10k profit. My initial thought is to give it 100% to my wife. Is this allowed as we are partners - should i be taking at least something? would HMRC be confused by this, or can it be quite a natural arrangement?

As far as I'm aware you can divide up the profits of a partnership anyway you want, and change the split from year to year if you like.

Ambit_miffed wrote: »

Secondly, would we be better off going down a different route? such as ltd company and taking dividends from the profit? - i'm a little unsure how this works, and for the £10k profit we have, ...

Ltd co? Probably not for £10k. Although that's just my opinion.

Ambit_miffed wrote: »

and cost savings might be negated by a need to have a proper accountant to do our books and file all the returns etc

A proper accountant might well be able to save you some tax on your current business set up anyway. But, yes there is an extra overhead with a ltd co.