Self Employed - Employing my wife

SelfEmployedPP

Hi,

I know this question has been posted before, but I can't seem to find a clear answer for my circumstances.

I am self-employed, earning above the higher rate tax bracket. My wife is in part-time employment earning under her tax free personal allowance.

I'd like to pay her to do my accounts and invoicing. She would still be earning less than her tax free personal allowance.

In terms of paperwork, what needs to be done? Do I need to set up PAYE? Does she need to inform HMRC? Does she need to inform her employer?

If she is earning below her personal allowance then I believe I don't have to pay national insurance, in which case is PAYE necessary? Can I not just fill in the relevant section on my tax return at the end of each year?

Thank you in advance for any help!

cte1111

Your wife would need to register as self employed, then invoice you for her services. She will need to do a tax return (not difficult). It depends on her contract with her employer, whether she needs to tell / ask them or not.

Kayalana99

It would be more cost savvy to make her a partner (partnership) and just have her claim up to her tax allowance.

I would of thought?

Also if your going down the employment route I believe (I might be wrong but I looked into it a month or so back) that because she has a 2nd job you might need paye.

trailingspouse

It's always worth speaking to an accountant, who can give you detailed advice based on your own circumstances. My OH and are both directors of our limited company, get equal dividends and so on, and that works for us - but it's complicated so it's best to speak to an expert.

SelfEmployedPP

Great, thanks all for the advice!

InsideInsurance

trailingspouse wrote: »

It's always worth speaking to an accountant, who can give you detailed advice based on your own circumstances. My OH and are both directors of our limited company, get equal dividends and so on, and that works for us - but it's complicated so it's best to speak to an expert.

What line of business is the company in? Certainly in some lines of business equal dividends wouldnt be recommended unless you are doing equal work in the company and is a red flag for HMRC


I agree with the suggestion of seeing an accountant. There are many ways you can play it with potentially varying levels of risk associated with it. An accountant can discuss the pros and cons of each and make a recommendation for your personal circumstances and risk appetite

Kayalana99

InsideInsurance wrote: »

What line of business is the company in? Certainly in some lines of business equal dividends wouldnt be recommended unless you are doing equal work in the company and is a red flag for HMRC


I agree with the suggestion of seeing an accountant. There are many ways you can play it with potentially varying levels of risk associated with it. An accountant can discuss the pros and cons of each and make a recommendation for your personal circumstances and risk appetite

If you own the company then you can do no work and still receive 100% profits without it raising a red flag. Its perfectly legal (and what difference does it matter what type of company they are running? Personal question to me)

InsideInsurance

Kayalana99 wrote: »

If you own the company then you can do no work and still receive 100% profits without it raising a red flag. Its perfectly legal (and what difference does it matter what type of company they are running? Personal question to me)

Certainly with those possibly with IR35 issues it can raise concerns, at least according to a number of accountants who I spoke to who said it would be a high risk strategy.

I'm not an accountant but certainly have in passing conversations outside of IR35 been told in general you cant do the old tricks of making all and sundry your shareholders to limit your tax liabilities. As it doesnt impact me I didnt bother querying it too much (obviously the nominal £1 shareholders who get 20% of your business turning over £500k)