Reply to: Ltd Vs Umbrella take home monies

[Snarf]

For me, the simple test is this: would you pay this amount of money for that amount of work to someone other than your wife? If you can honestly say yes, and it fits in with NMW legislation, then do it. If not, don't.

Good advice, Looking at last month it probably averages at £15 an hour which for an office admin is probably a little high, but its a salary not an hourly rate, some months will be a bit lower because she does more hours...

To be honest, although I understand why these rules are there if I was running a bigger company with more employees and wanted to pay my part time PA £50k it would be my decision and HMRC would have no say in it.. Anyway, best go find her some more work to do!

Thanks for the advice!

[northernladuk]

For me, the simple test is this: would you pay this amount of money for that amount of work to someone other than your wife? If you can honestly say yes, and it fits in with NMW legislation, then do it. If not, don't.

Fairest test I've seen so far. +1 from me.

[Alan @ BroomeAffinity]

I'm interested, I have recently set my wife up as an employee as she only works part time and had a few £k of her personal allowance available, now I know that if that was the end of it we would be in a bit of a dodgy situation as Id be paying her to do nothing... what exactly is the criteria for her being a legit employee?

She is "Doing office duties" ie sorting my recipients, replying to emails that come in while I'm unavailable, sending out invoices etc..

My concern now is that I didnt work out how long she spends doing this and her salary isn't based on that, its just a flat £210 a month, regardless of how much work she actually needs to.


Finally to the original poster, you mentioned that your accountant takes ages to reply to your emails.... get a new accountant.

For me, the simple test is this: would you pay this amount of money for that amount of work to someone other than your wife? If you can honestly say yes, and it fits in with NMW legislation, then do it. If not, don't.

[SueEllen]

If she is a "proper" employee she needs to earn at least minimum wage so has to be doing just over 32 hours of work for you a month.

If she is a company officer e.g. company secretary then it doesn't matter how much she earns for the work she does.

[Snarf]

Which isn't legal. Setting it up properly with your wife as a shareholder is another matter.

I'm interested, I have recently set my wife up as an employee as she only works part time and had a few £k of her personal allowance available, now I know that if that was the end of it we would be in a bit of a dodgy situation as Id be paying her to do nothing... what exactly is the criteria for her being a legit employee?

She is "Doing office duties" ie sorting my recipients, replying to emails that come in while I'm unavailable, sending out invoices etc..

My concern now is that I didnt work out how long she spends doing this and her salary isn't based on that, its just a flat £210 a month, regardless of how much work she actually needs to.


Finally to the original poster, you mentioned that your accountant takes ages to reply to your emails.... get a new accountant.

[Alan @ BroomeAffinity]

This is why some people who earn more, put the Wife on the payroll for doing sweet FA....

Which isn't legal. Setting it up properly with your wife as a shareholder is another matter.

[CloudWalker]

Assuming no other income and that you are the only shareholder, £42,385, gross.

This is why some people who earn more, put the Wife on the payroll for doing sweet FA....

[PerfectStorm]

Contrary to popular belief (especially among permies), running a ltd company doesn't offer any big *income tax* advantages. It does, however, allow you to pay less national insurance. Against that you have the expense of hiring an accountant (circa 2k annually) and the fact that your earnings tend to remain locked in the company.

Just how much NI you save is hard to know, because NI is so blisteringly complicated.

Not only that, the fact that you're a limited company means there's more money incoming in the first place (no holiday, benefits, redundancy etc to worry about on the client/employer side)

[unixman]

Contrary to popular belief (especially among permies), running a ltd company doesn't offer any big *income tax* advantages. It does, however, allow you to pay less national insurance. Against that you have the expense of hiring an accountant (circa 2k annually) and the fact that your earnings tend to remain locked in the company.

Just how much NI you save is hard to know, because NI is so blisteringly complicated.

[Alan @ BroomeAffinity]

Can you please explain me regarding Ltd company: how much can I take out of Ltd without going to higher tax band per year? Thanks.

Assuming no other income and that you are the only shareholder, £42,385, gross.

[GregK]

Can you please explain me regarding Ltd company: how much can I take out of Ltd without going to higher tax band per year? Thanks.

[mudskipper]

Can you please paste in a link for this £2000 allowance for company NI contributions, I would be interest in that maybe.

Why don't you take that phrase and paste it into google? It's amazing what computers can do these days.

[Blakes03]

Contreras – Thanks for confirming my figures and yes, agreed, at the moment I am very much letting the tax tail wag the company dog as this is a novelty after paying top rate tax for years. I more than likely will calm down on this front after a year, but as it is I am in a fortunate position that I do not need a high income at the moment.

PerfectStorm, again thank you for the advice but am not sure what you mean by be wary of anything purchased on credit? I have never used credit to buy anything except houses. Can you please paste in a link for this £2000 allowance for company NI contributions, I would be interest in that maybe.

Alan – I am not able to get around the 40% at the time of self-assessment but at least I am not paying for it from working. By my sums I will only have £2,537 at 20% which is better than nothing, maybe pay for a holiday. I do need to look into the Pension idea to get money out at some point. I have not had time to meet up with my accountant this year who I have used for years and is an old university friend. He moved up to Cheshire a few years ago and therefore not easy to catch up with him BUT on the plus side, when I do go up I shall be claiming mileage and a hotel to have a good night out and catch up ;-)

[Alan @ BroomeAffinity]

If you have a "private income" then the amount you can take out without paying higher rate tax is reduced. You'll need to factor this in. What tax planning discussions did you have with your accountant? Did he explain/explore how to get to this money in your company tax efficiently? Eg, as capital, claiming ER. What about pensions and life insurance? Have you looked at this?

[PerfectStorm]

Indeed. Especially be wary of anything purchased on credit.