Using a family member to help reduce tax bill.

NannaH

Aah,
I read it as OP was already paying them for work done.
I suppose if the family member is putting money back in the family kitty,  it becomes cost neutral rather than advantageous to Op’s tax position.    

Paying a spouse is always a good idea.  I put part of my ‘wages’  into my Sipp,   that’s my reasoning behind becoming officially registered as an employee next year,  I can be paid a bit more AND put more than my currently allowed £2880 into my Sipp, hopefully double it as DH’s business grows. 

Jeremy535897

NannaH said:

Aah,
I read it as OP was already paying them for work done.
I suppose if the family member is putting money back in the family kitty,  it becomes cost neutral rather than advantageous to Op’s tax position.    

Paying a spouse is always a good idea.  I put part of my ‘wages’  into my Sipp,   that’s my reasoning behind becoming officially registered as an employee next year,  I can be paid a bit more AND put more than my currently allowed £2880 into my Sipp, hopefully double it as DH’s business grows. 

Sometimes there are benefits in making your spouse a partner. Yes, they are then jointly and severally liable, but you can vary profit shares for the best result, and you don't fuss about payroll or justifying the deduction by reference to what the spouse does.

[Deleted User]

Jeremy535897 said:

NannaH said:

Aah,
I read it as OP was already paying them for work done.
I suppose if the family member is putting money back in the family kitty,  it becomes cost neutral rather than advantageous to Op’s tax position.    

Paying a spouse is always a good idea.  I put part of my ‘wages’  into my Sipp,   that’s my reasoning behind becoming officially registered as an employee next year,  I can be paid a bit more AND put more than my currently allowed £2880 into my Sipp, hopefully double it as DH’s business grows. 

Sometimes there are benefits in making your spouse a partner. Yes, they are then jointly and severally liable, but you can vary profit shares for the best result, and you don't fuss about payroll or justifying the deduction by reference to what the spouse does.

Never utilised enough.

evosy1978

[Deleted User] said:

NannaH said:

You could pay them just over the LEL to keep them getting NI credits if they need them but you would have to register as an employer AND run Payroll,  no NI or tax would be due from either party. 

Paying them under the LeL requires no registration on your part unless they have other earnings OR pension income. 

You have to pay them to their own bank account for proper record keeping.

It’s a no brainer if you are already paying them as you can claim it as expenses and bring your turnover down to avoid 40% tax 😉

It’s what my husband does with me, I do his books -   he’s a sole trader,  earns under the £85k limit so only the Self assessment Short form needs using.
At the moment he’s not registered as an employer but come April I will be getting a pay rise  🤣 so he will then register.  

Yes - that is all well and good as the ‘household income’ benefits overall. 

Depends what the op means by ‘family member’. 

Hi.
Basically its my son. He is 13 and I've been told he can do 2 hours an evening. Its paperwork he will do. 

I do my own tax returns online every year.  This year I will earn 65 thousand.    
I was hoping to so this so not to pay high rate tax.  
I do have a pension which I pay privately. 

I was going to pay him below his tax threshold.  

Thanks 

evosy1978

NannaH said:

Aah,
I read it as OP was already paying them for work done.
I suppose if the family member is putting money back in the family kitty,  it becomes cost neutral rather than advantageous to Op’s tax position.    

Paying a spouse is always a good idea.  I put part of my ‘wages’  into my Sipp,   that’s my reasoning behind becoming officially registered as an employee next year,  I can be paid a bit more AND put more than my currently allowed £2880 into my Sipp, hopefully double it as DH’s business grows. 

Sorry. Its my 13 year old son. I would pay him below tx and ni threshold. I was under the impression he can do 2 hours an evening.  Legally. It would be paperwork. 

 I'm thinking of doing this with the sole intention of saving me money on paying the high tax rate as I will earn more than that this year .  I do my own tax returns online.

Thanks

NannaH

When you say tax threshold, what do you mean? £12570?  

Assuming you pay for 10 hours a week at £12 an hour (  you can’t just pay him £25 an hour with no justification -   You wouldn’t get away with paying him £12k for part time work)
that would be £6200 so under the LeL limit , no need for registration, £6200 in your expenses.  

You’d save £2500 in tax, not sure about NI. 

It wouldn’t bring you down to 20% tax.  

Payments made have to be ‘realistic and proportional’.  

[Deleted User]

evosy1978 said:

NannaH said:

Aah,
I read it as OP was already paying them for work done.
I suppose if the family member is putting money back in the family kitty,  it becomes cost neutral rather than advantageous to Op’s tax position.    

Paying a spouse is always a good idea.  I put part of my ‘wages’  into my Sipp,   that’s my reasoning behind becoming officially registered as an employee next year,  I can be paid a bit more AND put more than my currently allowed £2880 into my Sipp, hopefully double it as DH’s business grows. 

Sorry. Its my 13 year old son. I would pay him below tx and ni threshold. I was under the impression he can do 2 hours an evening.  Legally. It would be paperwork. 

 I'm thinking of doing this with the sole intention of saving me money on paying the high tax rate as I will earn more than that this year .  I do my own tax returns online.

Thanks

How much were you considering paying a 13 year old?

NannaH

Also,  is your Turnover £65k  or your taxable income?  Big difference if you have material expenses. 

evosy1978

NannaH said:

Also,  is your Turnover £65k  or your taxable income?  Big difference if you have material expenses. 

Hi thanks.
So yeah I can't be silly and pay him daft amounts. But what you have written sounds good.  

So it would be classed as an expense? 

My turnover will be between 63 and 73. Unsure yet.  I do have  material expenses such as tools etc. Same as most years but I've done some calculations and after taking these away ill still be in the higher tax threshold. 

So yeah £12 an hour to equal £6000 sounds good to me.?? 

NannaH

I imagine kids with paper rounds get £10 an hour these days so £12 seems ‘reasonable’.  

I take it that it’s just the ‘short form’ self assessment that you have to use when doing your return?
I’m assuming you don’t use an accountant as you’d  have asked him or her about employing your son.

Pay him £6200, into his own bank account,  provide a ‘wage slip’ detailing hours worked  and rate of pay -  lump it together in expenses on your SA form,  job done. 

HMRC may query why your usual expenses have risen but then again they may not.
My husband’s expenses have definitely risen this year over last.