Contracting & tax & stuff for two people

[Sundayjumper]

My wife, currently not working, has been offered some freelance design work. Likely to be around 2 days per week. She'll be working from home and using her own computer etc. if that makes any difference.

I am already a contractor and operate through a Ltd Company.

Is it better to run my wife's work through my business, or set up her own Ltd Co, or be a sole trader ? Or something else ?

My accountant says to incorporate it into my Ltd Company but said it means a change of structure and there would be fees so I'm not sure if he's really impartial or just angling for some work.

[RobYob]

Sounds like she's not a director of your company already?

I have my wife take care of the business paperwork so she can claim a wage that way.

Already claiming a home office allowance?

If you don't want her as a Co director then I guess her own ltd co makes sense, I'm a rank amateur at this stuff though.

[240PP]

For something short term an umbrella company might be the easiest solution.

[Jobbo]

If she's not working already, are you using her income tax allowance? If you do it and pay her through the company she'll be an employee and I assume you'll end up having to pay employer's NI, corporation tax etc without any benefit in her personal taxation. Just do it in her sole name, prepare a pro-forma invoice template and that's enough. She will need to notify HMRC that she's self-employed if she hasn't already.

[Carlos]

If her net profit (after expenses) is going to be under £30k I would keep it simple and do self assessment as a sole trader.

My accountant knocked up a quick spreadsheet a few years ago showing the crossover point on ni/tax savings for a simple business as either a sole trader or ltd co. Hence my wife is a sole trader. Record keeping and accountability seems to be a bit more lax as a sole trader as well

[mikeyb]

The fees to change the structure of the business shouldn't be excessive, assuming it is merely transferring shares to your wife and potentially appointing her as a director. It'll certainly be a far cheaper than forming a new company and paying the annual accountancy costs of preparing the accounts/tax return.

[mikeyb]

If her net profit (after expenses) is going to be under £30k I would keep it simple and do self assessment as a sole trader.

My accountant knocked up a quick spreadsheet a few years ago showing the crossover point on ni/tax savings for a simple business as either a sole trader or ltd co. Hence my wife is a sole trader. Record keeping and accountability seems to be a bit more lax as a sole trader as well

Correct - although the net profit threshold has generally increased to over £40k, what with the dividend tax etc.

[ste]

Ask your accountant what his fee would be. It shouldn't be more than ~£100 all in.

My wife and I are both self employed, me through my Ltd company, her as a sole trader as it was the most efficient way of doing things. You really need to account for the details though of exactly what you both earn to make the decision, so it needs a discussion with your accountant really.

[Sundayjumper]

OK, some clarification:

Same as Rob's wife, she currently does my paperwork and is paid the appropriate salary through the existing company.

Her annual net profit on this new work will be comfortably less than £40k, it's only 2 days a week !

Client is a large company that will do things "properly", no under-the-table stuff.

It'll certainly be a far cheaper than forming a new company and paying the annual accountancy costs of preparing the accounts/tax return.

Yeah, I couldn't see an immediate benefit to having two companies unless there's some tax benefit you can claim 2x instead of just the once ?

[Sundayjumper]

My wife and I are both self employed, me through my Ltd company, her as a sole trader as it was the most efficient way of doing things.

My gut feeling was that this is the way to go, but as you rightly point out, unless I provide a lot more detail (which I'm not going to do on a public forum) it's impossible to give a definitive answer.

[ste]

Exactly. Give the details to the accountant and use their expertise.

[Sundayjumper]

Exactly. Give the details to the accountant and use their expertise.

I did, he said restructure my company and give him more money. I was looking for a second opinion in case he's not being completely impartial there !

[Carlos]

I wasn't implying your wife asks to be paid in cash and hide it under the bed

As a sole trader you don't need accounts you just declare gross income and total figure for expenses. Therefore the administrative burden of running the business is much much less. That is still doing it properly.

[Sundayjumper]

I wasn't implying your wife asks to be paid in cash and hide it under the bed

It's OK, that wasn't aimed at anyone, I was just preempting questions about the type of client !

Sole trader does seem simpler right now.

[mikeyb]

OK, some clarification:

Same as Rob's wife, she currently does my paperwork and is paid the appropriate salary through the existing company.

Her annual net profit on this new work will be comfortably less than £40k, it's only 2 days a week !

Client is a large company that will do things "properly", no under-the-table stuff.

It'll certainly be a far cheaper than forming a new company and paying the annual accountancy costs of preparing the accounts/tax return.

Yeah, I couldn't see an immediate benefit to having two companies unless there's some tax benefit you can claim 2x instead of just the once ?

I don't mind giving a second opinion (I am an accountant, not just an internet nerd!). Feel free to PM me your email address and we can continue the conversation off the public forum.

[Sundayjumper]

I'd just like to say a public thank you to Mike for the very detailed analysis he's sent me !

I'm going to have to sit down at home with a cold beer to digest it all.

[mikeyb]

You’re welcome. Will probably take a few beers though