Paying a family member whos claiming pension

dllive

Hi

Im a freelance copywriter. Im starting to get overwhelmed with the work, so Im looking to offload the 'easy' bits.

I was discussing with Mother last night, and she is more than capable of doing the work, and has a lot of time on her hands, and it would do her good to have something to stimulate her brain.

But Im not sure - from an accounting/tax perspective - what she'd need to do. She is claiming state pension, and has a bit of income from her ISAs, but apart from that has no other income.

I would be looking to pay her about £5k per year. This may only happen this year. Or it may continue into further years depending how it goes.

I think the state pension is about £11.5k, and the BR doesnt start until you have an income of £12.5k.

So does this mean I can pay her only £1k without her needing to inform HMRC? If I pay her more, is there a simplified self assessment form she can fill in?

Any guidance gratefully received.

Thanks

Dazed_and_C0nfused

dllive said:

Hi

Im a freelance copywriter. Im starting to get overwhelmed with the work, so Im looking to offload the 'easy' bits.

I was discussing with Mother last night, and she is more than capable of doing the work, and has a lot of time on her hands, and it would do her good to have something to stimulate her brain.

But Im not sure - from an accounting/tax perspective - what she'd need to do. She is claiming state pension, and has a bit of income from her ISAs, but apart from that has no other income.

I would be looking to pay her about £5k per year. This may only happen this year. Or it may continue into further years depending how it goes.

I think the state pension is about £11.5k, and the BR doesnt start until you have an income of £12.5k.

So does this mean I can pay her only £1k without her needing to inform HMRC? If I pay her more, is there a simplified self assessment form she can fill in?

Any guidance gratefully received.

Thanks

What makes you think this is her responsibility?

https://www.gov.uk/register-employer

Emmia

dllive said:

Hi

Im a freelance copywriter. Im starting to get overwhelmed with the work, so Im looking to offload the 'easy' bits.

I was discussing with Mother last night, and she is more than capable of doing the work, and has a lot of time on her hands, and it would do her good to have something to stimulate her brain.

But Im not sure - from an accounting/tax perspective - what she'd need to do. She is claiming state pension, and has a bit of income from her ISAs, but apart from that has no other income.

I would be looking to pay her about £5k per year. This may only happen this year. Or it may continue into further years depending how it goes.

I think the state pension is about £11.5k, and the BR doesnt start until you have an income of £12.5k.

So does this mean I can pay her only £1k without her needing to inform HMRC? If I pay her more, is there a simplified self assessment form she can fill in?

Any guidance gratefully received.

Thanks

If you only pay her £1k then depending on how much work she does, you risk falling foul of minimum wage requirements.

Ultimately you'd be employing your mum, so you need to set this up properly, agree an hourly rate for her etc.

flaneurs_lobster

I'm in no way condoning "cash in hand" methods, but is there really any great reason why this payment has to come from your company rather than as a personal cash gift?

Jeremy535897

It is true to say that the minimum wage rules technically apply to almost all wages, other than payments to family members who live in the same home as you. I assume this is not the case?
As you would be employing someone in receipt of the state pension, even if they are your sole employee, you will have to register as an employer because she will have a tax liability. See:
https://www.litrg.org.uk/employers/setting-employer/registering-employer
Once registered, HMRC ought to issue you with a code to apply such that all the tax she is due to pay is deducted by you from her wages.
Take her out for a decent meal every month instead, paid by you and not claimed as a deduction.

dllive

Thanks all for your comments. 

Thats a real shame. I knew it wouldnt be as simple as Id like it to be.

@Jeremy535897 : Unfortunately youre right, she doesnt live with me. I think Ill do as you suggest and spoil her with things instead.

Thanks all!

Sarahspangles

I’m probably missing something but…

You pay her as an employee.
She pays anything in excess of her personal allowance into a pension.
She draws it including 25% tax free whenever it suits her? Spreading this over a couple of tax years if that minimises tax.

Dazed_and_C0nfused

Sarahspangles said:

I’m probably missing something but…

You pay her as an employee.
She pays anything in excess of her personal allowance into a pension.
She draws it including 25% tax free whenever it suits her? Spreading this over a couple of tax years if that minimises tax.

The (potential) hassle and responsibilities of being an employer I suspect.

cannugec5

Sarahspangles said:

I’m probably missing something but…

You pay her as an employee.
She pays anything in excess of her personal allowance into a pension.
She draws it including 25% tax free whenever it suits her? Spreading this over a couple of tax years if that minimises tax.

Can you pay into a pension when you are already drawing the state pension? 

Dazed_and_C0nfused

cannugec5 said:

Sarahspangles said:

I’m probably missing something but…

You pay her as an employee.
She pays anything in excess of her personal allowance into a pension.
She draws it including 25% tax free whenever it suits her? Spreading this over a couple of tax years if that minimises tax.

Can you pay into a pension when you are already drawing the state pension? 

Yes, although often just £3,600 (inclusive of the £720 the pension company will add).

You can't once you are 75.

Albermarle

cannugec5 said:

Sarahspangles said:

I’m probably missing something but…

You pay her as an employee.
She pays anything in excess of her personal allowance into a pension.
She draws it including 25% tax free whenever it suits her? Spreading this over a couple of tax years if that minimises tax.

Can you pay into a pension when you are already drawing the state pension? 

If you were still working you could pay your whole salary into a pension, regardless of whether you are in receipt of the state pension or not.
What you can not do is get tax relief on the state pension itself.
For example if you had SP of £11K and £20K gross earnings, you could pay £20K gross into a pension, but not £31K.