Comments on: Income tax and NI - rates and allowances http://www.settingupyourbusiness.co.uk/income-tax-ni-rates-allowances/ Free advice on starting your own business Sun, 20 May 2012 04:38:54 +0000 http://wordpress.org/?v=2.7.1 hourly 1 By: malcolmcoles http://www.settingupyourbusiness.co.uk/income-tax-ni-rates-allowances/comment-page-1/#comment-1297 malcolmcoles Fri, 28 May 2010 07:29:37 +0000 http://www.settingupyourbusiness.co.uk/?p=78#comment-1297 Jim - no worries. It's only everything over the higher rate band that's taxed at 40% (so everything you earn up to that amount is taxed at the normal rate). I don't think you'd get away with what you're suggesting as your wife isn't actually running the business. What you could do, however, is pay your wife to do things like sending invoices / bookkeeping / anything else you can think of. Then you pay her to do this (you'll need to pay PAYE and NI as well). This has the effect of reducing your income and raising hers and will keep some/all of your income out of the higher band. You need to pay her a reasonable amount for the role. I'd issue a simple contract as well. But note that, while this might save you tax, it is now more complex for you to run the business as you have an employee and need to sort out her tax etc (Although you can of course pay her to do that!). If you're only just into the higher-rate band I probably wouldn't bother as the time spent on extra admin will outweigh the savings! Jim - no worries. It’s only everything over the higher rate band that’s taxed at 40% (so everything you earn up to that amount is taxed at the normal rate).
I don’t think you’d get away with what you’re suggesting as your wife isn’t actually running the business. What you could do, however, is pay your wife to do things like sending invoices / bookkeeping / anything else you can think of. Then you pay her to do this (you’ll need to pay PAYE and NI as well). This has the effect of reducing your income and raising hers and will keep some/all of your income out of the higher band.
You need to pay her a reasonable amount for the role. I’d issue a simple contract as well. But note that, while this might save you tax, it is now more complex for you to run the business as you have an employee and need to sort out her tax etc (Although you can of course pay her to do that!).
If you’re only just into the higher-rate band I probably wouldn’t bother as the time spent on extra admin will outweigh the savings!

]]> By: Jim http://www.settingupyourbusiness.co.uk/income-tax-ni-rates-allowances/comment-page-1/#comment-1295 Jim Thu, 27 May 2010 21:14:02 +0000 http://www.settingupyourbusiness.co.uk/?p=78#comment-1295 Malcolm, many thanks for an excellent resource! My wife and I are both employed; her salary being considerably lower than mine. I'm planning to do some work as a sole trader. My basic salary brings me very close to the higher rate band for tax, which (I think) means that virtually anything I earn will be taxed at 40%. Instead of this, can my wife, in effect, be the sole trader sending invoices in her name, while I do the work? Or is this simply not allowed/illegal? Thanks! Malcolm, many thanks for an excellent resource!

My wife and I are both employed; her salary being considerably lower than mine. I’m planning to do some work as a sole trader. My basic salary brings me very close to the higher rate band for tax, which (I think) means that virtually anything I earn will be taxed at 40%. Instead of this, can my wife, in effect, be the sole trader sending invoices in her name, while I do the work? Or is this simply not allowed/illegal?

Thanks!

]]> By: malcolmcoles http://www.settingupyourbusiness.co.uk/income-tax-ni-rates-allowances/comment-page-1/#comment-1021 malcolmcoles Sun, 03 Jan 2010 13:32:37 +0000 http://www.settingupyourbusiness.co.uk/?p=78#comment-1021 Personally. It's not a legitimate expense, sadly (nor is the cost of any accountant you use to prepare your personal tax return). Personally. It’s not a legitimate expense, sadly (nor is the cost of any accountant you use to prepare your personal tax return).

]]> By: Darren http://www.settingupyourbusiness.co.uk/income-tax-ni-rates-allowances/comment-page-1/#comment-1016 Darren Sun, 27 Dec 2009 20:24:28 +0000 http://www.settingupyourbusiness.co.uk/?p=78#comment-1016 This may be a stupid question but having just filed my sole trader tax return, am I now personally supposed to stump up the tax bill or is it a legitimate expense from my business account? Thanks. This may be a stupid question but having just filed my sole trader tax return, am I now personally supposed to stump up the tax bill or is it a legitimate expense from my business account? Thanks.

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