Adding Wife To My UK Ltd Company

[SHARPYWAN]

Hi,
I have added my wife as a director on companies house, she earns below the 40% tax rate (circa £28k part time). So i am adding her so she can take around £20k per year in dividends from my company, as i am already taking wages/divs up to £50k.
So other than adding her as a director on companies house and recording shareholders meeting and issuing new share certificate to my wife, what else do i do? How do i inform companies house/HMRC of her shareholding? (around 25%) or potentially alphabet shares? thanks in advance - Richard

 

[The Resolver]

Defiinitely alphabet shares. This enables you to set separate levels of dividend (ie split profit share out) for each of you..

You say her shareholding is 'around 25%'. If more than 25% then you must file notice of her as a Person With Significant Control. both within your internal statutory records you retain (within 14 days of the issue/transfer of shares) and at Companies House (within a further 14 days).

A Shareholders Agreement is vital to avoid problems occuring should (forgive me for saying this) the relationship deteriorate. See my page on this.

 

[Bilal Attique]

Completely agree on alphabet shares and up to 25%. You would need to amend the company's share capital at companies house and file a new confirmation statement and would need to register your wife as self-employed with HMRC for dividend income if she isn't already registered.

 

[UKSBD]

Hi,
I have added my wife as a director on companies house, she earns below the 40% tax rate (circa £28k part time). So i am adding her so she can take around £20k per year in dividends from my company, as i am already taking wages/divs up to £50k.
So other than adding her as a director on companies house and recording shareholders meeting and issuing new share certificate to my wife, what else do i do? How do i inform companies house/HMRC of her shareholding? (around 25%) or potentially alphabet shares? thanks in advance - Richard

Can she do any work for the company?
If so, why not employ her and pay her £10,000 a year 1st

 

[Bilal Attique]

Can she do any work for the company?
If so, why not employ her and pay her £10,000 a year 1st

She is already employed elsewhere earning £28k, adding another £10,000 will add national insurance and tax as well as employer national insurance as compared to dividends.

 

[UKSBD]

She is already employed elsewhere earning £28k, adding another £10,000 will add national insurance and tax as well as employer national insurance as compared to dividends.

You need to speak to your accountant or ask a question in the accounts forum

 

[2020Lawyer2020]

If she receievs merely dividends then that is not earned income so she would simply declare the dividends on her tax return each year and pay tax on them.

 

[Newchodge]

Why have you made her a director. She needs only to be a shareholder to receive dividends.

Do youpay yourself a salary? If so it may be worthwhile paying her £10,000 per year. She would have to pay 20% income tax but thta would be offset by savings in corporation tax and you would save empoyer's NI.

 

[SHARPYWAN]

Why have you made her a director. She needs only to be a shareholder to receive dividends.

Do youpay yourself a salary? If so it may be worthwhile paying her £10,000 per year. She would have to pay 20% income tax but thta would be offset by savings in corporation tax and you would save empoyer's NI.

Hi, i didn't know i could make her a shareholder without being a director. How would i do that please? Yes paying 20% IT but saving 19% CT makes sense compared to paying 8.75% divs. However i need to show a certain level of profits as we are moving house and need a new mortgage

 

[scstock]

Hi, i didn't know i could make her a shareholder without being a director. How would i do that please? Yes paying 20% IT but saving 19% CT makes sense compared to paying 8.75% divs. However i need to show a certain level of profits as we are moving house and need a new mortgage

Mortgage Lenders will take Dividend Income into account.

 

[Scalloway]

make her a shareholder without being a director. How would i do that please?

You can either transfer some of your shares to her or issue more shares.

Completing a stock transfer form

Find out how to complete a stock transfer form and get it processed.

www.gov.uk

Make changes to your private limited company

Making changes to your company - passing resolutions, changing addesses and where your records are kept, your company name and type, directors' and secretaries' details, share structure, constitution

www.gov.uk

 

[The Resolver]

Mortgage Lenders will take Dividend Income into account.

Whilst not necessary for dividends, appointing a Director if you are the sole Director will avoid the problems created b the recent ruling in Hashmi v Lorimer-Wing [2022] EWHC 191 that has made decisions by sole Directors invalid in the absence of specific elements in the Articles of Association that are absent from the Model Articles. This is coevred in a thread from last month.

If you are a sole Director and your company is governed by the Model Articles , I can help put that right for you,

 

[tony84]

Hi, i didn't know i could make her a shareholder without being a director. How would i do that please? Yes paying 20% IT but saving 19% CT makes sense compared to paying 8.75% divs. However i need to show a certain level of profits as we are moving house and need a new mortgage

Changing shareholding mid year might affect your options. It might be better to leave things as they are to keep it cleaner.

Lenders ask for 2 years self assessments usually and then average them out. If your wife only had one years worth her income from the business may not be accepted. Some lenders will take one years (but typically higher rates) and some might be ok with the fact the transfer is between husband and wife. But you are potentially cutting out a whole raft of lenders in order to save a bit of money in tax which could end up costing you in mortgage payments.

 

[studioJK]

Hi @SHARPYWAN

While it is important to get the corporate structure right, your main issue isn't the corporate structure (since ultimately, you and your wife are / would be the shareholders).

Rather, your main concern is tax, particularly around the settlement legislation - aspects of which are designed to prohibit spouses from obtaining tax advantage by structuring around different income tax bands. You would need to get proper tax advice that is tailored to your wife's and your circumstances - I'm afriad advice from a forum wouldn't generally be sufficient.