Who needs to register for tax? Part time business.

ImJustAsking

My wife and I are thinking about starting up a small part time business. I work full time already but my wife doesn't work at all as she is a stay at home Mum. The work split will be 50/50 in that I will be going out to do repairs at peoples homes and she will do all the invoicing, diarising appointments, taking calls, tax calulations and anything else apart from the physical work. We would like to register the business in a sole trader capacity. Is it legal for my wife to register as self employed and I work as an unpaid volunteer or do we both need to register independently? I have no intention of taking a wage or paying myself anything as all profits will be my wife's on paper. All banking will be done through my wife's personal account. The business insurance will be in her name. The reason we are thinking it would be better for her to register as self employed is because she doesn't currently work so therefore currently uses none of her personal tax allowance whereas I do. I want to keep everything above board but at the same time not pay more than we need to in tax and NI. If it's not legal I don't want to do it but if it is a loophole then I want to exploit it. Can anyone advise?

heretolearn_2

In theory, yes you probably could get away with it. However, it might raise a few questions if at any time the tax man should happen to look at your wife in any detail.

Why not pay you a small wage? You can always give it back to her :-) A family member working on a family business does not need to be paid minimum wage, so it can be just a token amount.

Another reason I would say this is very important is that your business will need liability insurance. Work done by an employee would be covered, but very unlikely in these circumstances if done by a 'volunteer'.

You also need to ensure it genuinely is her business and she genuinely does most of the work in it - if the tax man thinks you are just diverting your own income through her and she isn't really earning it, then you'll fall foul of tax evasion.

ImJustAsking

It will probably work out to be 50/50 split in terms of workload. I will basically be repairing communications equipment. My wife will be doing all the background admin work and booking of customers all day during the day while I am at my 9-5 job. I will then be visiting customers in the evenings and weekends to do the work she has booked in. My wife isn't trained in the work I will be carrying out and I'm not best placed to do the admin side of things.

Would it therefore be a better option to both register as self employed, pay my wife an annual salary of no more than £8,100 for the admin work she does and put the business in my name?

I'm just not sure what setup would be the best to keep us legal, free from having worry about being sued for tax related offences but at the same time not paying more (or less) in tax than we should as per the law.

mumof2nanof2

You may find it beneficial to go in to partnership together. Part of any major expenses may then be claimed back from tax you pay from your day job, before you start to make a profit. It means filling in two tax returns at the end of each year but a small accounting firm would be able to point you in the right direction and of course accounting costs are tax deductable.