Salary/Dividends Tax threshold

[THEPUMA]

On the hourly rate. So I can pay less, because she does less hours.

This is why the NMW becomes unimportant. I am paying here NMW but not triggering the tax bracket.

So you are avoiding the NMW issue by paying NMW. Well done.

[Ardesco]

Either could be challenged.

I agree, but generally speaking I think they would be hard pressed to find a court that would find that a salary of £5,000 a year was an unfairly high wage....

What annoys me the most is the dividend issue. Basically HMRC are saying that my company has to treat my wife/family members differently to any other shareholders, and that if I pay out a divi to all shareholders if one or more of them happen to be my wife/a family member I have to pay tax as if I paid myself the divi. The idea is totally bonkers!!!

On the hourly rate. So I can pay less, because she does less hours.

This is why the NMW becomes unimportant. I am paying here NMW but not triggering the tax bracket.

So you are avoiding the NMW issue by paying NMW. Well done.

[aj1977]

So you are avoiding the NMW issue by paying NMW. Well done.

I was thinking of paying my wife £5225 as the annual salary as it will attract no tax.But my accounting firm says that since she is paid by the company she has to be on PAYE and as per HMRC web site:

Pay As You Earn (PAYE)
Thresholds
The PAYE thresholds (the level of earnings at which tax becomes payable) are

£100.00 weekly
£435.00 monthly

These are the same as the earnings thresholds for NICs.

Rates
The tax rates are


Starting rate 10% up to £2,230
Basic rate 22% from £2,231 to £34,600
Higher rate 40% over £34,600


Am I missing something here....? How are u guys paying your wife/aprtner/spouse who does part time/admin work without paying tax for her salary

[THEPUMA]

I was thinking of paying my wife £5225 as the annual salary as it will attract no tax.But my accounting firm says that since she is paid by the company she has to be on PAYE and as per HMRC web site:

Pay As You Earn (PAYE)
Thresholds
The PAYE thresholds (the level of earnings at which tax becomes payable) are

£100.00 weekly
£435.00 monthly

These are the same as the earnings thresholds for NICs.

Rates
The tax rates are


Starting rate 10% up to £2,230
Basic rate 22% from £2,231 to £34,600
Higher rate 40% over £34,600


Am I missing something here....? How are u guys paying your wife/aprtner/spouse who does part time/admin work without paying tax for her salary

I think you are missing the fact that she has a personal allowance of £5,225 so therefore assuming she has no other income, the first £5,225 you pay her will give rise to no PAYE liability and possibly no NI liability (depending on when the payments are made).

[aj1977]

I think you are missing the fact that she has a personal allowance of £5,225 so therefore assuming she has no other income, the first £5,225 you pay her will give rise to no PAYE liability and possibly no NI liability (depending on when the payments are made).

Sorry to be naive...so she still has to be on PAYE but pays no tax and NI if her only income is £5225 is it?

[Platypus]

Sorry to be naive...so she still has to be on PAYE but pays no tax and NI if her only income is £5225 is it?

Yes. You have to have her on the payroll and issue payslips etc just as you do for yourself. It's just she will have no deductions.

IIRC I was advised to pay a little more than that just to take her into the bracket of paying some NI so her contributions ("stamp"?) were maintained. Or summit. Can't remember now. Ex wifey is long gone! Does this ring a bell with anyone else?

[Cheshire Cat]

This will sound like a REALLY newbie question, but the whole point of paying a spouse salary/divvies is to utilise their tax allowances, right?
Am I right in thinking that there's no net gain in paying my wife salary/divs if she's a high-earner, or have I missed some other advantage of this?

[THEPUMA]

This will sound like a REALLY newbie question, but the whole point of paying a spouse salary/divvies is to utilise their tax allowances, right?
Am I right in thinking that there's no net gain in paying my wife salary/divs if she's a high-earner, or have I missed some other advantage of this?

Generally that's right. I could conjure up some obscure circumstances where it is still worthwhile. The only normal circumstances I can think of would be if you were incurring substantial childcare costs it may be worthwhile paying her in childcare vouchers.

Also, theoretically if she is not a director, you would need to pay her NMW for the work that she does (if any).

[IR35 Avoider]

IIRC I was advised to pay a little more than that just to take her into the bracket of paying some NI so her contributions ("stamp"?) were maintained. Or summit. Can't remember now. Ex wifey is long gone! Does this ring a bell with anyone else?

You get credited for NI purposes at a threshold that is about five hundred pounds per year below the level at which you start paying tax and NI, so there is no advantage to paying more. (I think you pay tax and NI on amounts over £100 a week, but are credited for working if your salary is £87 per week.)

[r0bly0ns]

You get credited for NI purposes at a threshold that is about five hundred pounds per year below the level at which you start paying tax and NI, so there is no advantage to paying more. (I think you pay tax and NI on amounts over £100 a week, but are credited for working if your salary is £87 per week.)

I recently a similar conversation with my accountant as my wife is about to start doing some part time work for the company.
He advised to pay her at least £100 per week to ensure her NI contributions are up to the level to give her a pension.

He also mentioned to make sure we are not underpaying her for NMW.