Best use of partners tax allowance...

ronaldadio

Hi all.
First, I know about the small amount of tax I can transfer from my wifes tax allowance to me, aprox 10% of tax allowance.
I'm looking to see if there is anything else we can do, based on our circumstances...
I'm full time self employed, earning top line of around £40k PA
My wife stopped working due to chronic illness that means she struggles with pain throughout the day, but it's worse in morning/ evening. However, she is trying to find a role that can fit in with her issue.
I'm wondering if there's something we can do within my business that would allow her to work from home, as and when she's up to it, with a tax incentive higher than £1,190 (or whatever it is)
I work loads of hours so having a PA would be great & reduce my workload.
Any comments & advice appreciated or if you need more info just ask
Many thanks

Pennywise

If you convert your business to a partnership, you can share profits between you to use up some/all of her tax allowance.

pphillips

Pennywise wrote: »

If you convert your business to a partnership, you can share profits between you to use up some/all of her tax allowance.

Partners receive an equal share of the profits unless they have a written partnership agreement that makes alternative arrangements.

DoctorStrange

Can you operate your business as a limited company?

If so, you can pay your wife around £8400 free of tax and NIC, and this will also reduce your CT as well.

You could maybe also sell her 50% of the company to maximise the dividend allowances too.

[Deleted User]

pphillips wrote: »

Partners receive an equal share of the profits unless they have a written partnership agreement that makes alternative arrangements.

Not even remotely correct. The profits can be shared as they wish from 100%/0% to 50%-50% or a fixed share if more beneficial.

ronaldadio

Thanks for your responses.
Making her a partner in the business would mean she would have to complete a tax return? Is that correct?
Ltd Company - I'm not sure. I'd have to look at other areas of that outside of paying my Wife.
Would be easier for everyone if you could simply transfer ALL of their tax allowance, when someone doesn't/ can't work? We can dream

pphillips

[Deleted User] wrote:

Not even remotely correct. The profits can be shared as they wish from 100%/0% to 50%-50% or a fixed share if more beneficial.

Section 24(1) of the Partnership Act 1890 states:
"All the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses whether of capital or otherwise sustained by the firm."

If you don't want to this provision to apply, then you need a written partnership agreement.

pphillips

ronaldadio wrote: »

Thanks for your responses.
Making her a partner in the business would mean she would have to complete a tax return? Is that correct?
Ltd Company - I'm not sure. I'd have to look at other areas of that outside of paying my Wife.
Would be easier for everyone if you could simply transfer ALL of their tax allowance, when someone doesn't/ can't work? We can dream

Yes - if she was a partner she would have to complete a tax return. Would that not be easier than creating a limited company and putting her through the PAYE system?
I can't see what other option you have if you want to save tax.

00ec25

starting a formal partnership would require 3 tax returns
- the partnership itself
- partner A
- partner B


partnership accounts are not as simple as you may think and you may need an accountant to prepare them

BoGoF

pphillips wrote: »

Incorrect - the partnership itself does not need to do a tax return unless it is a Limited Liability Partnership.

Utter nonsense

NordicNoir

pphillips wrote: »

Incorrect - the partnership itself does not need to do a tax return unless it is a Limited Liability Partnership.

Why do you think that? It is untrue, non LLP partnerships must complete a tax return too.

It would be helpful, if you are going to contradict other posters' advice, that you are sure that you are correct, or better still, quote a reputable source.