Self employed or not!

[Daryl89]

Hi all,

Hope this is the right place for this. I run a sole trader business that I am registered as self employed for. I now also run a 2nd business that is a limited company. Now I assume my UTR remains the same as the one from the sole trader business?

My main question is this, my wife works for the limited company, she has no other employment. My limited company is registered for PAYE, foes she need to register as self employed or not? She is going to be receiving a salary for being the company secretary as well as dividends as she is a share holder. Now I understand there are 2 ways to register to get a UTR, self employed or not self employed. Does she need to register as not self employed in order to declare the dividends but not the salary?

Thanks

 

[Scalloway]

She will not be self employed for the salary but she will need to register for self assessment to pay the correct tax on her dividends.

 

[Daryl89]

She will not be self employed for the salary but she will need to register for self assessment to pay the correct tax on her dividends.

That’s what I thought, thank you, so it will be the ‘register if you are not self employed’ option.

 

[Daryl89]

Can I just confirm, if I pay her via PAYE and only £2000 a year in dividends then she doesn’t need to be registered for self assessment, is that correct? Also while I’m here, does anyone know how to amend the share percentages in a limited company, I’ve looked around but have found nothing concrete on how it’s done.

 

[NicoJ]

With regards to the UTR question, this is personal to you. The company will have it's own number as a separate tax payer.

Your wife won't need to register for self assessment if she only receives the £2k dividend.

 

[Scalloway]

how to amend the share percentages in a limited company

There are two ways to do it. Either transfer some of your shares to her or issue more shares. It may create other issues though. There is some advice here.

https://www.thejoyofbusiness.co.uk/how/giving-shares-to-your-spouse/

 

[Alan]

You may want to issue a different class of share so you can vary the dividends

"Split the shares into different classes

A company can have different classes of shares, known as Alphabet Shares, which can have different rights attached to them. For example 100 shares could be split into 50 A Shares and 50 B Shares, with both classes having the right to dividends but only the B Shares having any voting rights.

Having different classes of shares enables the company to pay out a dividend on only one class. It is then possible to pay the A shareholders without paying the B shareholders for example."

 

[Cube Digital]

I understand asking this question here, but really best getting your accountant to answer it for you. They will know the best way to take money out of the business with the lowest tax due.

 

[Daryl89]

I understand asking this question here, but really best getting your accountant to answer it for you. They will know the best way to take money out of the business with the lowest tax due.

Thanks, I do email my accountant but he tends to reply with pdfs from the gov website rather than advising. So I’ll ask ‘how should I pay my wife a salary and how much?’ And he will reply ‘here is a document on paying salaries that should help’.

I now have another question, Im about to pay my wife the salary for the work she has done this month, we share a main bank account, I believe she has another account but she can’t remember any of the details for it, can I pay her salary into out joint account or is that not recommended? If not I’ll ask her to get details of her sole account and pay her that way.

 

[SteveHa]

If you are only paying your wife for profit extraction, and assuming she has no other income, the ideal at the moment would be salary £8,628 (i.e. the NIC primary threshold) and dividends of £5,372. Your wife would have no tax or NIC to pay, she would get full NI credits for the year for pensions and benefits purposes, and the company would get tax relief of £1,639.32.

Of course, this is very generic, and proper advice will take your own personal circumstances and requirements into account.

EDIT: And yes, into a joint account is fine.

 

[Daryl89]

If you are only paying your wife for profit extraction, and assuming she has no other income, the ideal at the moment would be salary £8,628 (i.e. the NIC primary threshold) and dividends of £5,372. Your wife would have no tax or NIC to pay, she would get full NI credits for the year for pensions and benefits purposes, and the company would get tax relief of £1,639.32.

Of course, this is very generic, and proper advice will take your own personal circumstances and requirements into account.

EDIT: And yes, into a joint account is fine.

That’s great! Those are her circumstances, no other income and this is her only role, I am paying her £719 per month. The first payment being tomorrow. Is the benefit of the increased dividends over the £2000 tax free amount that we will only have to pay 7.5% dividend tax.

If I pay her £5372 in dividends I’ll have to pay myself the same if we are 50/50 shareholders. I earn over the tax free allowance so would have to pay dividend tax and income tax on the dividend payment.

 

[SteveHa]

I know this is said a lot, but this is where an accountant who knows your circumstances can be a big help. You have options, such as different share classes, but there are pitfalls to be aware of (google Arctic Systems).

 

[Daryl89]

I know this is said a lot, but this is where an accountant who knows your circumstances can be a big help. You have options, such as different share classes, but there are pitfalls to be aware of (google Arctic Systems).

Thank you, that case is an interesting read. I have thought about different share classes but will need to look into this. I think I’ll email my accountant with a few queries and hopefully he will be able to advise me.