Setting up Ltd company to pay husband for childcare?

tim091

Any thoughts on if there is a way of maximising tax efficiency on husband giving up work to look after our new born?

If both of us remained at work then we would have to pay £x childcare. Therefore there is a value on childcare and my wife intends to pay that to me for giving up work.

I am wondering if setting up a company with me as an employee would be a better way of doing that? Or any other ideas?

Skinto_7

Would that not just result in the same money being taxed twice and the loss of any unemployment benifits you would be entilted too?

Im no expert, but cant see how this would put you in a better financial position!!

silvercar

If this works then every SAHM mum would be employed by a company set up by their husband.

clearingout

assuming she were using childcare vouchers or intending to claim tax credits to help with the cost, you would minimally have to register as a childminder, go through all the Ofstead stuff and be 'approved' and you wouldn't be able to look after just your own child - so you would need to be seen to be actively seeking additional children to care for.

Childminding is actually quite a good way of earning whilst caring for your children. You should perhaps look into it.

If she is just paying you, you would, as the other poster says, be taxed twice (assuming she paid you enough that you have to pay tax) which would be a bit pointless. Not sure what it is you would gain?

Tiddlywinks

The same amount of money will be coming into the household; that is, one salary from your wife. Will that make you eligible for child tax credits (universal credits as it will be)?

If you set up a company and become its employee then you will have another income (as a salary or drawings depending on how you show it in the accounts) and this may have a negative tax benefit.

Anyway, I seriously don't think that the admin involved in this idea is really worth the hassle - after all, you will only have one customer and it will be a contrived business as your services will only be to your wife so I can't see HMRC being too happy with it either.

alwaysonthego_2

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katsclaws

There are costs involved in setting up as a ltd company.
You have to file an annual return to Companies House, You have to file annual accounts with HMRC and pay Corporation Tax on Profits.
Presumably your wife is going to pay you out of her taxed income. If you then register for PAYE you are effectively paying tax twice and also National Insurance. If you are a company director then you have to file a tax return. You will probably need accounting and payroll software. Payroll year end has to be filed online. I think the costs would be quite extensive. I'm not sure but you may even need liability insurance.

tim091

Thanks all, it was just an off the top of my head idea in the hope of stimulating a better idea from you wise folk! Looks like a non-starter then.

FYI wife's salary is high so we won't get any tax credits, child benefit etc (not complaining). I wouldn't be able to claim benefit as obviously I would not be available for work.

cb4fwh

This would make sense if you're wife was self-employed through a limited company, as you could be set up as a second shareholder & essentially pay yourself upto the higher rate tax bracket without paying any tax other than corporation tax on the business profits.

If she is PAYE, it doesn't make sense...

heretolearn_2

Geez, a new father thinking about the financial value of the childcare he is going to provide to his own baby and how can he get paid for it? And this in a financially well-off family?

Tasteless. Greedy.

00ec25

heretolearn wrote: »

Geez, a new father thinking about the financial value of the childcare he is going to provide to his own baby and how can he get paid for it? And this in a financially well-off family?

Tasteless. Greedy.

perhaps the reason why they are financially well off is because they think outside the box, explore alternatives and apply themselves to getting ahead, instead of sitting around whingeing about how society has failed them