Un-Married Tax Efficiancy

NoseBagUK

Hi,

I'm hoping for some advice about how I can save money on my tax bill.

I live with my long time girlfriend (lets call her Julia, because that is her name) and my 2 kids. I earn about 44k before tax (so just in the higher rate tax band).

Julia is a full time mum but does a little bit of outside catering (maybe 1k a year profit) and is set up as a sole trader, she declares this income through self assessment and is also registered as an employer in case she has anyone work for her and has to do PAYE & NI. All the rest of her income is provided by me.

I have the opportunity to do a bit of work on the side and want to do it in the most tax efficient manner.

I think if I decide to do the work then it might add about 5k to my annual earnings, which if I complete self assessment I presume I'm going to have to hand over 40% to the tax man.

So I wondered if it is legal to say Julia's company is doing the work for 5k and she is employing my to do it at minimum wage and she can declare the rest as her earnings? She will be handling all the paperwork for me so she technically could be said to be involved.

I obviously don't want to do anything illegal and I don't even mind paying the tax on the income, but 44k is not a massive amount when you have 2 kids and a mortgage and only one bread earner, and giving 40% to the tax man, while Julia's tax free allowance is not being used doesn't seem quite right.

Any and all advice gratefully received.

Phil

EDIT: Dam spelt "Efficiency" wrong in the title

CLAPTON

NoseBagUK wrote: »

Hi,

I'm hoping for some advice about how I can save money on my tax bill.

I live with my long time girlfriend (lets call her Julia, because that is her name) and my 2 kids. I earn about 44k before tax (so just in the higher rate tax band).

Julia is a full time mum but does a little bit of outside catering (maybe 1k a year profit) and is set up as a sole trader, she declares this income through self assessment and is also registered as an employer in case she has anyone work for her and has to do PAYE & NI. All the rest of her income is provided by me.

I have the opportunity to do a bit of work on the side and want to do it in the most tax efficient manner.

I think if I decide to do the work then it might add about 5k to my annual earnings, which if I complete self assessment I presume I'm going to have to hand over 40% to the tax man.

So I wondered if it is legal to say Julia's company is doing the work for 5k and she is employing my to do it at minimum wage and she can declare the rest as her earnings? She will be handling all the paperwork for me so she technically could be said to be involved.

I obviously don't want to do anything illegal and I don't even mind paying the tax on the income, but 44k is not a massive amount when you have 2 kids and a mortgage and only one bread earner, and giving 40% to the tax man, while Julia's tax free allowance is not being used doesn't seem quite right.

Any and all advice gratefully received.

Phil

EDIT: Dam spelt "Efficiency" wrong in the title

One would expect you to pay sufficient into a pension and avoid any 40% tax.

in general she can earn an income if she genuinely does the work : what you are suggesting would be fraudulent

Darksparkle

What work would you be doing? You say her business is outside catering, is that what you'll be doing too?

NoseBagUK

Darksparkle wrote: »

What work would you be doing? You say her business is outside catering, is that what you'll be doing too?

No its some computer programming work. But presumably she could set-up as a computer consultant and send off the quotes, invoices etc from her "company" and contract out the work to me?

Darksparkle

NoseBagUK wrote: »

No its some computer programming work. But presumably she could set-up as a computer consultant and send off the quotes, invoices etc from her "company" and contract out the work to me?

So you want her to set up a completely fake business just for the benefit of you not paying 40% tax.

It's your business and you doing the work. Why not then you employ her to do your records?

Neither you as an employer or her an an employee would pay any NIC if less than £155 per week.

Why not just pay into a pension and reduce your taxable income below HR?

NoseBagUK

Darksparkle wrote: »

So you want her to set up a completely fake business just for the benefit of you not paying 40% tax.

It would't really be fake, she would be the administrator/owner of the business and I would be an employee paid to do the work.

Darksparkle wrote: »

It's your business and you doing the work. Why not then you employ her to do your records?

Its a possibility, and the reason that I'm here asking the question, but I had hoped to avoid having to do my own tax return.

Darksparkle wrote: »

Why not just pay into a pension and reduce your taxable income below HR?

I am already paying a decent amount into a pension, so maybe some of it would be taxed at a lower rate, but paying into a pension isn't money that I can spend to pay my mortgage.

TheCyclingProgrammer

You could conceivably set up a business with your partner as the sole shareholder - she would be entitled to any profits as dividends after corporation tax.

But that's a huge amount of faff for £5k.