Income Splitting/Payments between Husband/Wife - Options?

[Taxicat]

My limited company has been trading for a while now and earns c.£100k a year (ouside IR35). At present I take a salary/dividend portion that takes me to c.£37k.

My wife is not employed at all the moment, but is still the director of an active limited company of her own. She has started doing legitimate work (currently unpaid) for my company (doing graphic design, marketing and admin). I am trying to work out (my accountant is no help!) what my options are to by able to pay her for the work she is doing, which would have the added bonus of extracting more income from my company.

The 3 options I have are:
1. Adding her as a shareholder (which currently only has 1 share issued) and director of my company to pay her a salary and dividends (I believe this is legal and am entitled to give her a share as a gift), OR
2. Paying her company as a service provider, OR
3. Employing her as an employee.

Can anyone offer any advice as to which of these options is the most tax efficient for us, with a possible suggestion of a ballpark reaosnable payment?

[Wanderer]

Hi and welcome!

I asked a similar question a little while back. Have a look at this thread and see if it's any help.

There is also an answer from an expert here Contractors' Questions: Can I 'income-split'? :: Contractor UK

It seems that it's more tricky to add someone as a shareholder in your company after it's formed than it is to form one with you both as shareholders in the first place. However, there seem to be special rules for spouses.

You may want to consider both trading through the same company, it might make the Inland Revenue's job more difficult with regards to investigating IR35 etc because you would be more of a business.

Might also be time to find a new accountant, though it's not that easy to just dump one and start up with another...

[northernladuk]

Hi and welcome!

I asked a similar question a little while back. Have a look at this thread and see if it's any help.

There is also an answer from an expert here Contractors' Questions: Can I 'income-split'? :: Contractor UK

It seems that it's more tricky to add someone as a shareholder in your company after it's formed than it is to form one with you both as shareholders in the first place. However, there seem to be special rules for spouses.

You may want to consider both trading through the same company, it might make the Inland Revenue's job more difficult with regards to investigating IR35 etc because you would be more of a business.

Might also be time to find a new accountant, though it's not that easy to just dump one and start up with another...

Nice post!

[Hex]

I'd give her some shares in your company and take her on as an employee playing her about £5400 (enough to get NI credits but not to pay any NI).

Shouldn't be an issue you gifting her shares as she's your spouse. No capital gains issues as far as I know.