How much to pay the other half?

[Work2live]

New Ltd company and 1st post...

Ok I would like to employ my wife in the most tax efficient manner, this will be her only employment I am torn between paying around the £400 pcm and £600 pcm i think if i pay the 600 i then have to pay other charges (NI contributions etc?) and if i pay upto £442 my wife will still qualify for the state pension/benefits without needing to worry about NIC's.

What do people recommend? I have a ltd company just me and would employ my wife in a clerical capacity but that may increase to i.t design work. Does my wife have to do the book keeping or is filing enough?

Thanks

[northernladuk]

What about making her a shareholder as well and paying divs? You have to make sure if you are going to pay her that she is seen to be earning that money. A bit of booking keeping doesn't equate to £600 a month. I am sure loads of people pay their other halves and they don't justfiy it but it will end in tears.

Could be worth checking the search out. This has been asked and discussed a bit. Check out income splitting or words like that.

[MarillionFan]

New Ltd company and 1st post...

Ok I would like to employ my wife in the most tax efficient manner, this will be her only employment I am torn between paying around the £400 pcm and £600 pcm i think if i pay the 600 i then have to pay other charges (NI contributions etc?) and if i pay upto £442 my wife will still qualify for the state pension/benefits without needing to worry about NIC's.

What do people recommend? I have a ltd company just me and would employ my wife in a clerical capacity but that may increase to i.t design work. Does my wife have to do the book keeping or is filing enough?

Thanks

She will have to do something. Sitting on her backside watching Cash in the Attic, the odd invoice filing and conjugal rites a couple of times of month won't come to £600 pcm.

Get her to do the book keeping. Firstly it means she's earning the money for actually doing something, and second it saves you having to pay the accountant(or the time yourself) to do the bookkeeping.

[Wanderer]

Yeah, definitely consider making your spouse a shareholder and pay dividends (presuming you would hit the higher rate tax otherwise).

[Clare@InTouch]

New Ltd company and 1st post...

Ok I would like to employ my wife in the most tax efficient manner, this will be her only employment I am torn between paying around the £400 pcm and £600 pcm i think if i pay the 600 i then have to pay other charges (NI contributions etc?) and if i pay upto £442 my wife will still qualify for the state pension/benefits without needing to worry about NIC's.

What do people recommend? I have a ltd company just me and would employ my wife in a clerical capacity but that may increase to i.t design work. Does my wife have to do the book keeping or is filing enough?

Thanks

If she has a normal 747L tax code then you can pay £589 per month before any tax or NI kick in, and she'll still then get credit for her state pension.

[psychocandy]

If she has a normal 747L tax code then you can pay £589 per month before any tax or NI kick in, and she'll still then get credit for her state pension.

I take it theres not much point paying your Mrs if she works somewhere else anyway?

[Clare@InTouch]

I take it theres not much point paying your Mrs if she works somewhere else anyway?

Depends how much she earns, but if you're her second employment then she'd be on a BR code meaning the tax she'd pay would equal the CT you saved = no overall benefit.

[ASB]

Depends how much she earns, but if you're her second employment then she'd be on a BR code meaning the tax she'd pay would equal the CT you saved = no overall benefit.

True enough. There is also a scenario where it would make things worse.

If her combined income from both jobs was > higher rate threshold then ultimately tax will be payable in excess of the CT saved. This would necessitate a tax return and should ultimately cause the tax office to spit out a flat rate D code (assuming they still do these) in order to at least try and collect the correct amount through PAYE.

In the above scenario if she happened to be paid enough in the second job to be paying NI then this could lead to NI in excess of the normal employee maximum being paid. In this case it is reclaimable direct from the contributions office, but its a pain to have to do it.

I accept the above scenarios are unlikely in practice though.

[Wanderer]

I take it theres not much point paying your Mrs if she works somewhere else anyway?

No. Though you might consider paying her dividends if she is not a higher rate tax payer. Bear in mind that it will complicate her tax affairs and she won't thank you for that unless you sort out all the self assessments etc and make good any higher rate tax she incurs from taking the dividends.