Shareholders - Income shifting

[Fred Bloggs]

Hmmm, thanks. I think I will reduce my salary next year down to about £6k. I cannot see a downside quite frankly. The NI I save, I will put into my SIPP.

[ASB]

My Pension forecast from 2 weeks ago shows me as having 30/30 pension entitlement. I'm 51 years old and have worked since being 16. I'm wondering whether to reduce my 10k salary next year to save NI.

The only benefit you will be getting from that NI (approx 1100 in total) is a tiny bit of serps (or SSP2 whatever they call it this week). No idea how much benifit you'll from it but I think I can guess.

You might (or might not it may have gone up to 55) be able to consider immediate vesting in the pension. This can potentially be a good wheeze. Basically stuff your salary down to 5k, save 1100 in NI. Chuck the 1100 in NI at the pension, get the tax rebate, take 25% lump sum (of course of the inflated amount with relief). The remaining fund used to purchase an annuity. It can be effective as part of pension planning for some.

Equally of course you could just chuck the 100 you have saved into a pension for a few years. Obviously charges etc need to be considered.

TBH just stick it in a biscuit tin and it'll probably be better for you in your dotage than whatever you get of SSP2.

[Ruprect]

My Pension forecast from 2 weeks ago shows me as having 30/30 pension entitlement. I'm 51 years old and have worked since being 16. I'm wondering whether to reduce my 10k salary next year to save NI.

Do it, and put what you've saved into a pension. It'll be worth more than the govt will give you.

HTH.

[Fred Bloggs]

The other advantage will be her state pension. Paying her 6k (which costs absolutely nothing in NI) will get her 1 years worth of entitlement. Now (or is it next year) the requirement drops to 30 years fpr full state pension entitlement.

Ok, it's not going to make a huge difference when you retire, but it will be a damn site better than a poke in the eye with a sharp stick.

My Pension forecast from 2 weeks ago shows me as having 30/30 pension entitlement. I'm 51 years old and have worked since being 16. I'm wondering whether to reduce my 10k salary next year to save NI.

[Peoplesoft bloke]

Myself, I'm just hoping that the Gov't have so many other problems that this one will be quietly forgotten about............... Am I being too optimistic?

Probably - I can't help feeling the impetous for all this comes from Hector, and since this goverment has given hector more resources, he's going to keep on regardless of El Gordo and his mob.

[ASB]

Only Dividends

The other advantage will be her state pension. Paying her 6k (which costs absolutely nothing in NI) will get her 1 years worth of entitlement. Now (or is it next year) the requirement drops to 30 years fpr full state pension entitlement.

Ok, it's not going to make a huge difference when you retire, but it will be a damn site better than a poke in the eye with a sharp stick.

[Bluebird]

Correct, provided she has no other income.

Only Dividends

[ASB]

With the current personal alloawance about £6k, am I right in thinking that if I pay my spouse £500 a month based on £10 an hour for 50 hours a month [ equivilent to abou 2.5 housr a day ], then she pays no tax?

Correct, provided she has no other income.

[Bluebird]

How about paying them a wage commensurate with the hours actually worked and at a market hourly rate for the type of work they do?

Obviously no-one knows what the new rules will be (if they come in at all) but given their stance on the "personal service company" question in the tax return, it wouldn't be a surprise if the "fee earner" was taxed on all the dividends leaving nothing but market rate salary for any administrative staff.

With the current personal alloawance about £6k, am I right in thinking that if I pay my spouse £500 a month based on £10 an hour for 50 hours a month [ equivilent to abou 2.5 housr a day ], then she pays no tax?

[Fred Bloggs]

Myself, I'm just hoping that the Gov't have so many other problems that this one will be quietly forgotten about............... Am I being too optimistic?

[philip@wellwoodhoyle]

What is a good allocation of shares for paying spouse shares for work they do on my books?

How about paying them a wage commensurate with the hours actually worked and at a market hourly rate for the type of work they do?

Obviously no-one knows what the new rules will be (if they come in at all) but given their stance on the "personal service company" question in the tax return, it wouldn't be a surprise if the "fee earner" was taxed on all the dividends leaving nothing but market rate salary for any administrative staff.

[BrilloPad]

The new legislation is due to be announced / introduced in April 2009.

You can currently have a 50/50 split of shares between you and your spouse regardless of the amount of work they do.

In the future it's liekly that this will change, although how this willwork as yet nobody [ and I guess that includes the gvt ] know.

I think we can be sure it will be something like the IR35 stuff - totally bodged and probably unenforceable.

[Bluebird]

The new legislation is due to be announced / introduced in April 2009.

You can currently have a 50/50 split of shares between you and your spouse regardless of the amount of work they do.

In the future it's liekly that this will change, although how this willwork as yet nobody [ and I guess that includes the gvt ] know.

[itsme]

Have the legislation for this changed yet? If not what is the likelyhood they will back date?

What is a good allocation of shares for paying spouse shares for work they do on my books?

Thanks in advance