Paying yourself and spouse wages....

[Bluebird]

Ok, so my accountant told me last year to pay myself something like £624 PCM, then that would avoind any NI contributions and and Income tax.

This year I was thinking of doing the same, but also adding my wife on the payroll, so effectively it's £1250 a month tax free, or £15000PA tax free.

Firstly does this seem ok to do - ie I presume it's legal although maybe not morally correct.

Are there any implications or not paying NI, I presume that when I do payroll, HMRC pick up the fact that it's below the NI threashold and we still qualify as making NI contributions?

Thanks

Dave

[Pondlife]

If your missus isn't doing any real work for Your Co then it's probably unwise to give her a salary however small.

Have you looked at making her a shareholder and splitting dividends?

[Bluebird]

If your missus isn't doing any real work for Your Co then it's probably unwise to give her a salary however small.

Have you looked at making her a shareholder and splitting dividends?

yes, we already split dividends - see does most of the book work and accounts at the moment, she is a contractor herself - just hasn't had a contract for a while.

It's the NI implications I'm most interested in.

Thanks

Dave

[eek]

yes, we already split dividends - see does most of the book work and accounts at the moment, she is a contractor herself - just hasn't had a contract for a while.

It's the NI implications I'm most interested in.

Thanks

Dave

You need to show that the amount of money you pay her (that is wages not dividends) is the market rate for the work that she does.

That means you can't pay her £624 as a bookkeeper if it takes 10 minutes a month (an extreme example)

[Nathan SJD Accountancy]

Are there any implications or not paying NI, I presume that when I do payroll, HMRC pick up the fact that it's below the NI threashold and we still qualify as making NI contributions?

Dave

Can't see any implications as a result of what you said.

Your accountant has advised the salary that is below the requirement to pay NIC, but above the limit so it still counts as enough earnings for a qualifying year.

[northernladuk]

Loads of threads on this...

http://forums.contractoruk.com/accou...rs-salary.html

http://forums.contractoruk.com/accou...7-paye-ni.html

http://forums.contractoruk.com/accou...-taxation.html

etc...

If you are going to include your wife pay her what she is due, don't look at it as tax free option. One is reasonable, the other could be considered aggressive tax avoidance. Pay her what is reasonable for her time. You only pay your accountant £1200 a year so £6k for book keeping is laughable. The fact that she won't be doing this when she is in contract would also indicate you don't really need it so a bit of a sham as well. I have a personal beef about this just pay her up to the threshold issue so others may say differently. IMO if you are going to blindly do this without proper justification why not just add 20% to your mileage and put a couple of made up receipt less claims in as well.......

[Nathan SJD Accountancy]

http://forums.contractoruk.com/accou...x-bands-3.html

This thread has a good explanataion too. It was very recent too, I think it was last week.

[Bluebird]

http://forums.contractoruk.com/accou...x-bands-3.html

This thread has a good explanataion too. It was very recent too, I think it was last week.

Thanks Nathan - that makes sense now of what my accountant told me last year [ just pay £624 pcm ].

I presume I don't make a monthly nil return, just one at the end of year?

[Master]

Can we not argue the same and ask what work does one do for his own limited to account for the £624 / pm salary and how is it attributed as market rate?

If one is saying they are earning revenue for the Ltd through a gig that is worth several hundred a day, then £624 a month is not market rate for it is it?

This question deviates from the OP's question, but just asking to get the views of accountants (and of course NLUK)...

[Nathan SJD Accountancy]

I presume I don't make a monthly nil return, just one at the end of year?

For the current tax year (2012/13) you need to do monthly or quarterly notifications. This can be done on the following link and takes a few seconds.

HM Revenue & Customs: No PAYE/NICs payment due

It lets HMRC know that they should not expect a payment from your company for PAYE/NIC.

For 2013/14 (6 April 2013 onwards), the RTI submissions each month will let HMRC know what is or in your case, what is not due.