Self-Employed with LTd Company and Tax

Dazed_and_confused

ALso if you don't mind me asking, when I first asked him about setting up a limited company it was because I thought I needed it so I could pay my partner a small wage to pay towards a pension. However she is now paying Class3 contributions which means I won't need to pay her a wage, I wonder if it would have made more sense to work as a sole-trader...

You either misunderstood, were given duff advice or haven't told us the whole story as there is no reason why you, as a sole trader, couldn't have employed your wife providing she was genuinely working in your business.

matt78uk

Because she only needs about 3 hours a week to do the book-keeping, I can't pay her a wage of £50/hr to reach the threshold to get a pension, that was the reason he first suggested the Class3 Voluntary Contributions.
I just need to record which store I cover every day, miles, hourly rate and any extra and check that I have been paid the right amount once they send me an invoice.

Matt

antrobus

matt78uk wrote: »

Because she only needs about 3 hours a week to do the book-keeping, I can't pay her a wage of £50/hr to reach the threshold to get a pension, that was the reason he first suggested the Class3 Voluntary Contributions.
I just need to record which store I cover every day, miles, hourly rate and any extra and check that I have been paid the right amount once they send me an invoice.

Matt

Appoint her as a director of the company. Directors can do a lot of work for a company.

I am aware that HMRC can challenge the amount paid as salary to a spouse, partner, whatever. But the country is still full of small limited companies with spouses, partners, whatever who are paid a salary just above the LEL.

silvercar

matt78uk wrote: »

Hello everyone,

after receiving so many helpful suggestions a few months ago I decided to ask foe some advice again.

I quit my job as a Pharmacist in November 2016 and started working as a locum.
I have opened a Limited Company in April as I had been told I could save more money this way. My partner (we are not married but we have been living together for a long time) is helping me by doing some book-keeping and she has got a 10% share in the company.
I have been suggested to pay myself the minimum wage and to get some dividends every quarter or so.
1) Do you know How much should I pay myself to get the most of it? I don't do the same hours every week, does it make a difference? Can I pay myself the same fixed amount every month? (I have ben suggested just below £917/month, is it correct? )
2) Also, my partner has just started paying Class3 Voluntary Contributions so she will be able to pay toward a pension, how much should I pay her for her job? I have been looking everywhere and unfortunately I am not a very "money-wise" person, I just don't want to mess up with the Class3 contributions.
3) By paying taxes I will be able to get a State Pension someday (probably when I 'll be 80 or so ... :mad: ) where do Class2 Voluntary Contributions come into play in this? Are they worth it? I think you can pay them if you earn more than the Small Profits Threshold of £5,965. (Does it have to do with the £917 I was talking about at point 1? )

Thanks everyone in advance :beer:

Matt

The magic number, for the year to qualify for state pension contributions without paying any NI contributions (employer or employee) is £680 per month.

Other things being equal.

isplumm

Matt.

I assume that as she owns 10% of the company everytime the company pays a dividend, she gets 10%, you get 90%?

For our LTD, I split the company 50/50 - so my wife got 50% of any dividends - this reduces my tax bill -

Not sure whether you can do the same for partners - but a good accountant would be able to tell you?

Thanks Mark

00ec25

isplumm wrote: »

Not sure whether you can do the same for partners - but a good accountant would be able to tell you?

Thanks Mark

"partner" status as used in this thread (ie. co-habiting) is irrelevant

either the partner is or is not a share holder of the company. If she is then she gets whatever dividend the class of shares entitles her to have. If there is only one class of shares then the dividend must be the same for her as it is for him ie: dividend rate of £x per share x number of shares held

if you want to have differential dividends without issuing more shares to make her holding larger, and his therefore correspondingly smaller, you instead need to create a different class of share and declare a different dividend for it.

very much the territory of an accountant

matt78uk

Thanks everyone for the replies so far.
An update:
Tried to contact HMRC and didn't get any info: first phone call I could hear people talking among themselves for a few minutes then they must have realised somebody was on the line and instead of answering (it was me screaming HELLOOOOO?!? and IS ANYBODY THERE?!? with no result...) they hung up. Second phone call a guy picked up the phone asking for my UTR number, just managed to say that I didn't have one and that was the reason of the call and he hung up on me too...
I spent ages waiting in the queue for nothing... (well I did record the phone calls and I guess I might find them amusing in the future once everything is sorted...).
Then I decided to ring my Accountant, googled his website as usual to get the phone number and guess what? The number has not been recognised... I sent him 2 emails, one on the 12th of June and one on the 1st of May and still waiting for a reply... I am going to find a new accountant for sure!


Silvercar: where did you get the £680 from?
the government's website gives different numbers:
---
For the tax year 2016 to 2017, the Income Tax information below applies to both Scotland and the rest of the UK (England, Wales and Northern Ireland).

PAYE tax rates, thresholds and codes 2016 to 2017
Employee personal allowance £212 per week
£917 per month
£11,000 per year
Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £32,000
Higher tax rate 40% on annual earnings from £32,001 to £150,000
Additional tax rate 45% on annual earnings above £150,000
Emergency tax codes 1100L W1, 1100L M1 or 1100L X
---
Isplumm: I'll have t discuss this with my (new) accountant, thanks for the info

Thanks everybody again.

Matt

sheramber

Silvercar was referring to NIC not income tax

00ec25

matt78uk wrote: »

Silvercar: where did you get the £680 from?
the government's website gives different numbers:
---
For the tax year 2016 to 2017, the Income Tax information below applies to both Scotland and the rest of the UK (England, Wales and Northern Ireland).

PAYE tax rates, thresholds and codes 2016 to 2017
Employee personal allowance £212 per week
£917 per month
£11,000 per year
Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £32,000
Higher tax rate 40% on annual earnings from £32,001 to £150,000
Additional tax rate 45% on annual earnings above £150,000
Emergency tax codes 1100L W1, 1100L M1 or 1100L X
---
Isplumm: I'll have t discuss this with my (new) accountant, thanks for the info

Thanks everybody again.

Matt

it is too late now to do payments to the wife in respect of the tax year 16/17 as we are now in tax year 17/18

as silvercar said, the magic number to avoid her paying ANY tax but still "earning" a credit towards state pension is earnings between the Lower Earnings Limit (LEL) and the Primary Threshold (PT) as shown on National Insurance table

matt78uk

silvercar wrote: »

The magic number, for the year to qualify for state pension contributions without paying any NI contributions (employer or employee) is £680 per month.

Other things being equal.

isplumm wrote: »

Matt.

I assume that as she owns 10% of the company everytime the company pays a dividend, she gets 10%, you get 90%?

For our LTD, I split the company 50/50 - so my wife got 50% of any dividends - this reduces my tax bill -

Not sure whether you can do the same for partners - but a good accountant would be able to tell you?

Thanks Mark

00ec25 wrote: »

it is too late now to do payments to the wife in respect of the tax year 16/17 as we are now in tax year 17/18

as silvercar said, the magic number to avoid her paying ANY tax but still "earning" a credit towards state pension is earnings between the Lower Earnings Limit (LEL) and the Primary Threshold (PT) as shown on National Insurance table

Thanks for the reply,
it was the table down the page I had to look at! :T

To be honest from all you guys have told me I think my partner could just as well pay Class3 Voluntary Contributions and I will setup myself as the only employee, as I was saying she would only work a few hours a week and I couldn't justify paying her a salary of £50/hr (I know some people do but I couldn't sleep at night).
I guess the same threshold would be the same for me.

Thanks again,

Matt