[Tax Planning][17/18] Company structure - spouse

[atanas]

Hello,

I am planning to incorporate a LTD next month and I need an advice on the company structure:

That's the plan:

Director[50% shares]:

• Profile: Senior Automation QA
• Desired daily rate: ~ £350-£500
• Target anual income: ~ £90,000 - £100,000
• Director salary: £8,150

Secretary[50% shares]:

• Anual income:
  * ~ £32,000 permanent employment outside the LTD
  * £8,150 secretary salary

1. Does this company structure make sense considering that my wife is a permie and gets salary just below the basic rate? Will there be tax advantage if I include her as an employee?
   
2. Shall I reduce her shares to 35%?

Thanks all

[Lance]

1. Get an accountant.
2. Ask him/her.
3. Ask him/her to setup the company. A lot of firms include that in the price.

[eazy]

Dividends

You need to take into account the dividends as well when making the decision regarding shareholdings. In this case, your spouse's dividends will be taxed at the higher rate.

I would not pay a salary to the spouse, only dividends. Set the shareholding such that it takes spouse's earnings to higher rate threshold.

I would take professional advice as suggested above.

[TheCyclingProgrammer]

If your spouse is already getting dividends which will likely take her into the higher rate band then I can't see any logic in paying her a salary.

Reducing the shareholding might be sensible if she is expected to stay on this salary level, but you don't want to be constantly messing around with your share structure IMO.

Speak to an accountant.

[Alan @ BroomeAffinity]

You're thinking along the right lines but you need to nail down a couple of basics. Give an accountant a shout. There's a few of us on here I'm sure would be happy to help you out.

[northernladuk]

Pffff. 8k for secretarial duties when she's working the same hours as you. You are having a laugh.....

[ladymuck]

Am I right in thinking you don't have to appoint a company secretary any more? Or, is this secretary role quite literally that, and not an official role?

[TheCyclingProgrammer]

Am I right in thinking you don't have to appoint a company secretary any more? Or, is this secretary role quite literally that, and not an official role?

You don't have to but it's definitely beneficial for your spouse to be a company officer if she's also a shareholder so she can be eligible for ER in the future.

Mine is currently CS though I'm planning to make her a director. I'm not sure there's any real reason to choose one over the other.

[Neil@Intouch]

Hello,

I am planning to incorporate a LTD next month and I need an advice on the company structure:

That's the plan:

Director[50% shares]:

• Profile: Senior Automation QA
• Desired daily rate: ~ £350-£500
• Target anual income: ~ £90,000 - £100,000
• Director salary: £8,150

Secretary[50% shares]:

• Anual income:
  * ~ £32,000 permanent employment outside the LTD
  * £8,150 secretary salary

1. Does this company structure make sense considering that my wife is a permie and gets salary just below the basic rate? Will there be tax advantage if I include her as an employee?
   
2. Shall I reduce her shares to 35%?

Thanks all

I would advice an alphabet share structure, which would be suitable in this circumstance to allow flexibility on the dividends you take out of the business, and not have the restriction of 50/50 dividends.

Paying your wife a salary would mean that it would all be taxed at 20% (income tax), but yes you will get the corporation tax relief on the salary of 20% also, but the tax efficient way will be with an alphabet share structure. 1 ordinary A for yourself and 1 ordinary B for your wife. Any dividends from £32k to £43k this year or £45k for 2017/18 will be taxed at 7.5%. Any dividends into the higher rate tax threshold will be taxed at 32.5%.

Bear in mind though that if this is all in place for the 2016/17 tax year, £5,000 of dividends can be taken tax free regardless of employment income, so would recommend utilising this if possible.

I hope this helps.

[SueEllen]

You don't have to but it's definitely beneficial for your spouse to be a company officer if she's also a shareholder so she can be eligible for ER in the future.

Mine is currently CS though I'm planning to make her a director. I'm not sure there's any real reason to choose one over the other.

CS have less legal liability as they follow the director's(') instructions.

They can still be taken to court for injuries during a match, but from what I've read their liability is more about not raising alarms to the right people.