Using Partners Allowance under Special Circumstances...

[ChrisPackit]

Hope you can help with this one.

At the moment, I run my Ltd with myself as the only shareholder and employee, and would ideally love to utilise my wifes tax allowance as she doesn't work. However, she suffers from panic attacks quite frequently since the birth of our son and receives a minimal allowance from HMRC in recognition of this. What position would I be in to contribute dividends to her (possibly as a shareholder), and is there a limit that she could earn before this allowance may be affected. I cannot seem to find the answer anywhere on the HMRC site.

Thanks for your help...

[ASB]

Hope you can help with this one.

At the moment, I run my Ltd with myself as the only shareholder and employee, and would ideally love to utilise my wifes tax allowance as she doesn't work. However, she suffers from panic attacks quite frequently since the birth of our son and receives a minimal allowance from HMRC in recognition of this. What position would I be in to contribute dividends to her (possibly as a shareholder), and is there a limit that she could earn before this allowance may be affected. I cannot seem to find the answer anywhere on the HMRC site.

Thanks for your help...

She cannot have dividends unless she is a shareholder.

You do not state what benefit she is receiving. Between you you may or may may not receive WFTC and a whole gamut of other things. From your descriptions she may possibly be receiving the lowest tier disability living allowance.

In general most allowances are means tested in some way or form, so any income she receives from any source may affect it. As might "deemed income" from any capital she may have access to.

[Wanderer]

Your wife could stop claiming the benefit and start drawing a salary from your company, perhaps paid just below the tax threshold as many couples do. She could also be given equal shares in the company and the dividend split 50/50.

However, it may be that she is better off not drawing a salary, but still becoming a 50% shareholder. Depending on her circumstances, she may be on a benefit which is not means tested and it may be that she can take dividends and still keep her benefit.

You should definitely get professional advice on that...

[prozak]

Hope you can help with this one.

At the moment, I run my Ltd with myself as the only shareholder and employee, and would ideally love to utilise my wifes tax allowance as she doesn't work. However, she suffers from panic attacks quite frequently since the birth of our son and receives a minimal allowance from HMRC in recognition of this. What position would I be in to contribute dividends to her (possibly as a shareholder), and is there a limit that she could earn before this allowance may be affected. I cannot seem to find the answer anywhere on the HMRC site.

Thanks for your help...

I guess you need to work out whether losing the benefit makes you worse off.

It also depends a lot on how much money goes through your company.

Before paying additional tax anyone can earn 43,875 this financial year in total (including dividend tax credit)

Have a read of threads here.. there is great advice... In addition you might want to offer your employees (i.e You and your wife) childcare "vouchers" through your company (PAYE + NI free) to give her a break.

At the least you should determine whether employing her makes sense - she could have earned 5715 this year with no tax or NI liability (this goes up to apprrox 7200 next year i think).

So the benefit of that to you financially this year was 5715 * 0.21 = £1200

Next year the benefit goes up to 1400 ish...(next year the small companies rate drops to 20%)

Then on top of that you have the dividend benefit.

Any dividend you pay your wife as a shareholder has a 22.5% benefit to your family (up to 43875) assuming you pay dividends to take you up to the 43875 limit.



I think my numbers are OK.

I am sure someone will correct me if I am wrong.

[Wanderer]

So the benefit of that to you financially this year was 5715 * 0.21 = £1200

So if ChrisPackit's wife receives more than that in non means tested benefit already then it may not be worth paying her a salary, only dividends which she may be able to receive without affecting her benefit.

[ChrisPackit]

So are paying her dividends as a shareholder looks like it could be the answer then? This wouldn't or shouldn't affect the non-means tested Incapacity benefit she receives then?

My Accountant can't offer any advide on this, so maybe a trip to a Financial Advisor would be beneficial....

[northernladuk]

So are paying her dividends as a shareholder looks like it could be the answer then? This wouldn't or shouldn't affect the non-means tested Incapacity benefit she receives then?

My Accountant can't offer any advide on this, so maybe a trip to a Financial Advisor would be beneficial....

It could be worth doing a search on here. The idea of giving your partner shares and offloading some of your dividends to her does have its pitfalls and it has to be done properly. From what I remember you can't just give her 50% of the shares and starting giving her the cash. There is some due process to follow. Again I can't remember so hopefully someone that can will comment but she has to buy them and so on. If you do it wrong you are going to raise a nice big target to HMRC to get investigated for tax evasion/avoidance (can't remember which it is either).

Sorry for being so vague but try a searching for partner or dividends or something as I am sure we discussed this once and it isn't straightforward.

[prozak]

It could be worth doing a search on here. The idea of giving your partner shares and offloading some of your dividends to her does have its pitfalls and it has to be done properly. From what I remember you can't just give her 50% of the shares and starting giving her the cash. There is some due process to follow. Again I can't remember so hopefully someone that can will comment but she has to buy them and so on. If you do it wrong you are going to raise a nice big target to HMRC to get investigated for tax evasion/avoidance (can't remember which it is either).

Sorry for being so vague but try a searching for partner or dividends or something as I am sure we discussed this once and it isn't straightforward.

I think as a wife you ARE able to gift her the shares.

Alternatively, you get your company to allot new shares and increase the shares that are issued and she pays the company for them. This SHOULD be possible within your the first 5 years of your companies life without too much of an issue if you have used a standard formation....