Sole trader paying wife to lower tax

Hi,

I have a sole trader business and I sometimes hire freelancers to work for me. I then pay them accordingly.

My wife also works on the business but the money usually goes through my accounts to be taxed and we then split the money after. It's been this way for a while.

I was wondering if it would be possible for me to pay her the same way I pay a freelancer and she declare the money she is sent through her own self-assessment and pay her own tax bill.

That way we both have entitlement to the tax free allowance?

Thanks
«13

Comments

  • She already has an entitlement to a Personal Allowance.

    Do you have a PAYE scheme in operation?

    If not would you be paying her less than £123/week and does she have another job at all?

    What is her State Pension situation like?
  • She already has an entitlement to a Personal Allowance.

    Do you have a PAYE scheme in operation?

    If not would you be paying her less than £123/week and does she have another job at all?

    What is her State Pension situation like?
    She has her own business where she sees the odd client every now and again. She puts that through her self-assessment already but it's nothing really. Maybe £1500 per year. She helps me with our main business when she can as we have young children.

    I don't have a PAYE scheme set up. It's mainly me and her working on the business with the odd person I hire to do some temporary tasks for me.

    I would pay her more than £123 per week.

    No state pension I believe.
  • [Deleted User]
    [Deleted User] Posts: 0
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    edited 23 November 2023 at 10:09AM
    premiumz said:
    She already has an entitlement to a Personal Allowance.

    Do you have a PAYE scheme in operation?

    If not would you be paying her less than £123/week and does she have another job at all?

    What is her State Pension situation like?
    She has her own business where she sees the odd client every now and again. She puts that through her self-assessment already but it's nothing really. Maybe £1500 per year. She helps me with our main business when she can as we have young children.

    I don't have a PAYE scheme set up. It's mainly me and her working on the business with the odd person I hire to do some temporary tasks for me.

    I would pay her more than £123 per week.

    No state pension I believe.
    Why don’t you make her a partner in the business? You can allocate the profits as you both see fit e.g a percentage share or a fixed amount. 

    Yes, you would have to register as a partnership and complete a partnership return but that would achieve what you are seeking as you ‘split’ the money anyway.
  • premiumz
    premiumz Posts: 86
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    edited 22 January at 2:51PM
    premiumz said:
    She already has an entitlement to a Personal Allowance.

    Do you have a PAYE scheme in operation?

    If not would you be paying her less than £123/week and does she have another job at all?

    What is her State Pension situation like?
    She has her own business where she sees the odd client every now and again. She puts that through her self-assessment already but it's nothing really. Maybe £1500 per year. She helps me with our main business when she can as we have young children.

    I don't have a PAYE scheme set up. It's mainly me and her working on the business with the odd person I hire to do some temporary tasks for me.

    I would pay her more than £123 per week.

    No state pension I believe.
    Why don’t you make her a partner in the business? You can allocate the profits as you both see fit e.g a percentage share or a fixed amount. 

    Yes, you would have to register as a partnership and complete a partnership return but that would achieve what you are seeking as you ‘split’ the money anyway.
    We are not sure where the business is heading right now. So we are just looking for a solution that doesn't involve that just yet. Hoping to simply pay her like a freelancer as mentioned above.
  • You can, as long as she is actually doing the work to earn the money and you aren't overpaying her... its naturally a bit of a red flag that people pay partners £12k to send 1 email a quarter etc. 
  • sheramber
    sheramber Posts: 18,617
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    I would pay her more than £123 per week.

    As she only 'helps out when she can', how many hours a week would she be working  and how much would you be paying her?


  • sheramber said:
    I would pay her more than £123 per week.

    As she only 'helps out when she can', how many hours a week would she be working  and how much would you be paying her?


    She does around 5 hours everyday and a couple hours on Saturday and Sunday if we are home.
  • You can, as long as she is actually doing the work to earn the money and you aren't overpaying her... its naturally a bit of a red flag that people pay partners £12k to send 1 email a quarter etc. 
    She works around 5 hours a day. So if I can pay her, should she send me an invoice or will it be okay to just pay her straight from the business bank account?

    Thanks
  • SVaz
    SVaz Posts: 224
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    As she has income from her own self employment, you will have to employ her and run payroll.  She can’t get away with being freelance and invoicing you I’m afraid. 
    I pay my wife, currently under the LeL so I don’t have to do either of the above but come April I will pay her around £7k so will have to register as her employer and run payroll, or rather she will as she does all the accounts etc. 
    She just needs to be paid into her own bank account, you should also knock up simple payslips for her. 
  • sheramber
    sheramber Posts: 18,617
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    You cannot just say someon eis self emplyed rather than employed.

    You can check here  https://www.gov.uk/government/collections/employed-or-self-employed

    If employed, you have to pay at least minimum wage and pay employer's National Insurance as well as operate a payroll.
     
    It is much simpler to set her up as a partner and then you can allocate a share of the profits to her.

    She will then report her share to HMRC.
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