Sole trader paying wife to lower tax

SVaz

You don’t have to pay family members minimum wage 🙄

Although in the case of a spouse it would be foolish not to, as the salary both reduces your tax bill and benefits the family.

Hoenir

premiumz said:

DullGreyGuy said:

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. 

Minimum wage will need to be paid as an employee. 

SVaz

Not true if they live with you.

[Deleted User]

Hoenir said:

premiumz said:

DullGreyGuy said:

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. 

Minimum wage will need to be paid as an employee. 

 Family members who live in the family home and who work in the business will be outside the scope of the national minimum wage.

premiumz

SVaz said:

Not true if they live with you.

So as she already puts a few quid through her own self-assessment, she cannot invoice me for doing some work and me pay her? Don't freelancers do all sorts of work and put it through their self-assessment? If she absolutely cannot do that. Is her being on the payroll or becoming a partner the only options then?

As I am a sole-trader. Who do I go to to official make her a partner? I never had to officially go anywhere to say I was the owner. So I am a little confused on this one.

sisisimoore

Yes, you can absolutely do that. 

But as always, consult an accountant first. 

xylophone

No state pension I believe.

Does she receive child benefit for the children?

https://www.gov.uk/child-benefit/what-youll-get#:~:text=You'll get National Insurance,you're not working

Has she obtained a state pension forecast?

sheramber

premiumz said:

SVaz said:

Not true if they live with you.

So as she already puts a few quid through her own self-assessment, she cannot invoice me for doing some work and me pay her? Don't freelancers do all sorts of work and put it through their self-assessment? If she absolutely cannot do that. Is her being on the payroll or becoming a partner the only options then?

As I am a sole-trader. Who do I go to to official make her a partner? I never had to officially go anywhere to say I was the owner. So I am a little confused on this one.

Did you use the link given to check if she is employed or self employed?


For the partnership , you do not need to do anything more than advise HMRC you want to register the partnerhip. They will set up a partnership record for it.

You report your income/expenses on the partnership tax return and allocate the share of the profit to each partner.

You and your wife will need to complete partnership pages on your tax return to report your partnership income.

You will need to advise HMRC that your self employment has ceased and the date on which it ceased.

You will complete a self employed page for your 23/24 return for the period up to the date the self emplyment ceases and partner pages for the period from that date.

Your wife needs to complete self employed pages for her own business and partner pages for her share of the partnership income.

If you have an accountant he will keep you right.

[Deleted User]

sheramber said:

premiumz said:

SVaz said:

Not true if they live with you.

So as she already puts a few quid through her own self-assessment, she cannot invoice me for doing some work and me pay her? Don't freelancers do all sorts of work and put it through their self-assessment? If she absolutely cannot do that. Is her being on the payroll or becoming a partner the only options then?

As I am a sole-trader. Who do I go to to official make her a partner? I never had to officially go anywhere to say I was the owner. So I am a little confused on this one.

Did you use the link given to check if she is employed or self employed?




You will complete a self employed page for your 23/24 return for the period up to the date the self emplyment ceases and partner pages for the period from that date.

Has this changed?

I should say that I used to specialise in partnerships and this would not have been the methodology when I did so. 

Instead a partnership return would be completed for the set of accounts ending in the tax year and the profits apportioned as follows:

Partner A - sole trader period plus partnership share.
Partner B - partnership share.

The basis period for A is the whole accounting period, presumably 6th April 2023 to 5th April 2024. 

The basis period for B is the date of commencement to 5th April 2024. 

No self-employed pages are completed.

On reflection, this has to be correct as there is , presumably, only one accounting period (you couldn’t declare it twice on a self-employed section and a partnership return).

HMRC manual:

For any accounting periods ended in 2022 to 2023 during which this business was carried on exclusively by a sole trader, fill in boxes 9 to 30 on the Self-employment (short) pages (or boxes 15 to 65 and boxes 83 to 99 of the Self-employment (full) pages) of that person’s tax return. 

The important word is ‘exclusively’. If the condition is not met, again from internal manual:

If, during the year ended 5 April 2022 a trade or profession carried on in partnership which was previously or is subsequently carried on by one of the members of the partnership as a sole trader, fill in boxes 3.24 to 3.26 or boxes 3.13A to 3.23 and boxes 3.27 to 3.73, boxes 3.82 to 3.117, as appropriate, in this Partnership Tax Return for any period of account ending in the year to 5 April 2022 during any part of which the business was carried on in partnership.

‘Any part of which’ bring the deciding factor.

Veteransaver

If she is already registered as self.employed.and does her own tax return, then I don't think there is really any reason she can't just invoice you and you pay her like you would any other contractor or business you use.
Ideally she should invoice other businesses as part of her own self employed business though, not sure if IR35 applies but it might look a bit like disguised employment should the revenue challenge it. But if the amounts are relatively small and variable (ie not simply the same amount each month / week) and all declared on her tax returns it should be ok.
Or just go the partnership route, you can then include her business earnings in one return.