What Payment Method is Both Legal and Maximizes My Net?

[Dynamic]

I'm going to setup a company and I'd need to figure out how to manage my taxes which would be both legal and it would maximizes my net income.

I'm married and my wife doesn't work. I see 3 main factors affecting this; 1) Director and ShareHolder (DS) 2) Employee (E) or not 3) Husband (H)/ Wife (W).

Therefore there are 3! states/options = 6.

1) H.DS
2) H.DS&E
3) H.DS + W.DS
4) H.DS + W.DS&E
5) H.DS&E + W.DS
6) H.DS&E + W.DS&E

Just to explain, e.g the #6 means that I and my wife both become the managing director shareholder and employee of my company. #1 not sure is valid at all, I mean can a Company not have a employee and still earn money?

So my main question is assuming my Company's revenue would be £60k annually, which way would be best for us that pays least tax and is legal as well?

Thanks,

[Old Greg]

I'm going to setup a company and I'd need to figure out how to manage my taxes which would be both legal and it would maximizes my net income.

I'm married and my wife doesn't work. I see 3 main factors affecting this; 1) Director and ShareHolder (DS) 2) Employee (E) or not 3) Husband (H)/ Wife (W).

Therefore there are 3! states/options = 6.

1) H.DS
2) H.DS&E
3) H.DS + W.DS
4) H.DS + W.DS&E
5) H.DS&E + W.DS
6) H.DS&E + W.DS&E

Just to explain, e.g the #6 means that I and my wife both become the managing director shareholder and employee of my company. #1 not sure is valid at all, I mean can a Company not have a employee and still earn money?

So my main question is assuming my Company's revenue would be £60k annually, which way would be best for us that pays least tax and is legal as well?

Thanks,

Set up a Ltd. Pay yourself salary up to the tax free allowance £7475. You will probably not get away with paying your wife the same if she is not actually working for clients, but you might get away with paying her a small amount for a couple of hours per month bookkeeping, managing invoices, CV etc. - not sure about that.

Split the shares 50-50 between you.

I am not an accountant so probably worth speaking to one.

[thunderlizard]

Directors don't have to be shareholders, and vice versa. (If they did, board meetings at Tesco would be very crowded). That gives you some more options to play with.

[SueEllen]

Your accountant will tell you how they interpret the law in what you can do legally to maximise your income.

If you do a search on this board you will find that different accountancy firms have different ways of interpreting the law.

[Wanderer]

Take option 6.

Consider carefully how much you pay your wife - it's supposed to be a fair market rate for the work done. If she does the accounts and admin stuff then it may be less than the £7475/year that she could earn tax free. If she is more involved in the business, perhaps acting as a PA, a researcher (so beloved of MPs) or drumming up business for your company then perhaps she can be paid more. If you get investigated then you will have to justify the salary.

Make her a director so if something happens to you then she can still run the company (eg take money out)

Be 50/50 shareholders (eg 1 share of £1 each) and you can maximise the amount of dividends you take. If you are lucky enough to earn fees that put you into the higher rate tax bracket then consider retaining the money in the company for a rainy day and take it out in future years when you dip below the higher rate tax or via ESC-C16 if you cease trading.