Self Employed paying partner wages?

beavis182

My friend is self employed with his own car parts company and wants to pay is wife (whos unemployed) wages

What is the limit he can pay her before she has to pay tax? Is it £5725??

thanks in advance. tony

Carlbl

Hi,

Basic tax code is 603L so believe it is £6035, but need to be aware of employer ni, and employee ni.

A good source of info is HMRC website.

Carl

beavis182

excellent, thanks for that.

K H

You need firstly to register a paye scheme.
just ring hmrc 'new paye schemes'.

then pay the wife a salary between £390 (the lower earnings limit) and £450 (the threshold at which ni becomes payable) per month .

this will avoid payment of ni but maintain her status for benefits/pensions etc. in the future.

if you then file the p35 online your client will also receive the tax free incentive payment if it's still available. (last year was £100)

she can also claim mileage if she collects/delivers etc. in her own car.

K H

farmergiles

I would be careful of the national minimum wage rules.
Wouldn't it be better to become a ltd company and make her a Director? Pay her £6000 as directors fee and any balance as dividends

Dean

farmergiles wrote: »

I would be careful of the national minimum wage rules.

I'm guessing she wouldn't be working full-time. :001_smile:

Regards

Dean

Poodle

K H wrote: »

she can also claim mileage if she collects/delivers etc. in her own car.

and the staff Christmas do:001_smile:

Poodle

marine

K H wrote: »

You need firstly to register a paye scheme.
just ring hmrc 'new paye schemes'.

then pay the wife a salary between £390 (the lower earnings limit) and £450 (the threshold at which ni becomes payable) per month .

this will avoid payment of ni but maintain her status for benefits/pensions etc. in the future.

if you then file the p35 online your client will also receive the tax free incentive payment if it's still available. (last year was £100)

she can also claim mileage if she collects/delivers etc. in her own car.

K H

Can only claim tax free incentive if tax was paid during the previous year.

Regards:thumbup1:

K H

Dear Marine

i'm sorry you are not correct.

you can claim the tax free incentive for just filing online, i know i,ve done it.


best wishes


K H

marine

Hi K H

I had a client last year who had a PAYE scheme set up but no tax and nic had been paid as there was none due, during the year. (all employees under the threshold)

When i rang HMRC to explain they said they wouldn't have to file the P35 just send a letter in and they wouldn't be able to claim the tax free incentive.

Have i spoken to another 'twit' at HMRC again? :glare:

Thanks

Bluewednesday

I didn't think you could file a nil return online - all ours were done as a letter faxed to the relevant regional office.

marine

Bluewednesday wrote: »

I didn't think you could file a nil return online - all ours were done as a letter faxed to the relevant regional office.

So am i right in what i was thinking, that if there is nothing due, you dont file online hence you cant claim the incentive?

Thanks

K H

Anyone that is paid above the lower earnings limit needs a p60 and a record of that payment made recorded on the p35 or it will have an effect on their future entitlement to benefits etc.

so,even if the p35 has no tax or ni on it, a record of the employees pay must be returned to hmrc.


K H

groundy

The incentive is not paid where there is no need to file a P60. If you pay the wifes wage just above ni threshold say £455 per month at present then a P60 is required and the incentive can be claimed.

A-Vic

groundy wrote: »

The incentive is not paid where there is no need to file a P60. If you pay the wifes wage just above ni threshold say £455 per month at present then a P60 is required and the incentive can be claimed.

Every year me and my manager have the same problem with clients about this.

P35's still have to be filed even if a nil and we produce a p60 for all employees.

http://www.hmrc.gov.uk/paye/endtaxyear.htm

deanshepherd

Where there are no employees paid above the lower earnings threshold then no P35 is required and in fact cannot be submitted online. Hence no PAYE online filing incentive.

Anyone with employees above the lower earnings threshold (i.e. directors paying themselves £450 per month) need to submit a P35 irrespective of whether any tax or NI has been deducted. The incentive will be due in these cases.

T.C.

Another point to consider: In a recent enquiry, I had a client who was paying his partner. He had to show how much work was done by the partner to prove that the wages were ligitimate. It might be worth checking what the partner actually does for the business, ie book-keeping, stock checking, ordering parts etc.

PaulPSB

T.C. wrote: »

Another point to consider: In a recent enquiry, I had a client who was paying his partner. He had to show how much work was done by the partner to prove that the wages were ligitimate. It might be worth checking what the partner actually does for the business, ie book-keeping, stock checking, ordering parts etc.

I agree totally because I've had the same - The Inspector interviewed the wife to ascertain her "working knowledge" of the business. HMRC now look to ensure that salary paid to a spouse is both legitimate and based on normal commercial rates for hours worked.

Paul

A-Vic

deanshepherd wrote: »

Where there are no employees paid above the lower earnings threshold then no P35 is required and in fact cannot be submitted online. Hence no PAYE online filing incentive.

Anyone with employees above the lower earnings threshold (i.e. directors paying themselves £450 per month) need to submit a P35 irrespective of whether any tax or NI has been deducted. The incentive will be due in these cases.

It must be the payroll package am using then because ive had no problems as of yet filing Nil returns

deanshepherd

Did you get the online filing incentive though?

A-Vic

deanshepherd wrote: »

Did you get the online filing incentive though?

No your perfectly correct on that score :001_smile:

groundy

PaulPSB wrote: »

I agree totally because I've had the same - The Inspector interviewed the wife to ascertain her "working knowledge" of the business. HMRC now look to ensure that salary paid to a spouse is both legitimate and based on normal commercial rates for hours worked.

Paul

Why did you let HMRC interview the wife. You should have asked for any questions to be put in writing giving you the chance to send a well thought detailed reply.

Dean

groundy wrote: »

Why did you let HMRC interview the wife. You should have asked for any questions to be put in writing giving you the chance to send a well thought detailed reply.

Groundy, prehaps it was a genuine case!

It would also be more cost effective for the client, to have the wife answer a few of HMRC's questions than write a detailed reply!!

Regards

Dean

groundy

Dean wrote: »

Groundy, prehaps it was a genuine case!

It would also be more cost effective for the client, to have the wife answer a few of HMRC's questions than write a detailed reply!!

Regards

Dean

I disagree, we do not let HMRC interview any of our clients genuine or not. The only person to benefit from an interview is HMRC, even genuine innocent comments made by clients can be misused by HMRC, we have experienced this in the past.

Obviously everyone has their own methods but I truly believe there is no gain to the client in meeting with HMRC.