📍 Tax advantages for Employing your spouse💘📍

Clearly, you know the person well, and therefore all the concerns about trust (should) go out the window.

From a financial point-of-view, there are certain benefits that you can achieve through employing a spouse. Let’s take a look at some of them now;

💭Use up your Tax Allowance!

Almost everyone living in the UK is entitled to an Income Tax Allowance; “the amount of income you can receive each year, without having to pay tax on it”. For the majority of the working public, this figure currently stands at £12,570 (2021/22).

By employing a spouse, you can make sure that your partner is using up all of this non-taxable income. If they do a job for free, pay them! After-all, its money going into your household – that isn’t getting taxed. Just think; how much would it cost to employ a non-family member to do the same job?

💭 Higher Rate Business – Split your profits

On a similar note; directors of a business which pays a higher rate of tax can also benefit from taking on a spouse, by making them “more than just an employee.”

If your spouse were to become a shareholder in the company, for example, you can pay yourselves a mixture of salary & dividends, and make use of the £2,000 dividend tax free band (2021/22), thereby reducing your overall tax bills quite considerably. Not only this, but once again, more money going into your household.

📢However, becoming a shareholder of a company can mean other rights are attached to this, so we would recommend you seek legal advice first before giving away shares.

💭Save on National Insurance costs

If you are a 'director only business' with no other employees and you pay an additional employee or spouse £8,840, the employment allowance can be claimed through the payroll at a total of £4,000 for the tax year, giving relief on Employers NI.

💭Don’t get caught out!

It is important that your spouse is treated like a “normal” employee. Just because you are in a personal relationship with them, it doesn’t mean you can exploit them for your own gain.

The National Minimum Wage rules therefore still apply, and your spouse must actually be paid what they are owed (and are thus affordable to you). Just like with a normal employee, if your spouse is not involved in any other paid employment the normal new employee process must be followed.

To avoid any unwelcome visits/checks from HMRC; make sure that your spouse is employed to do a “proper” job within your organisation.

💭Employing a spouse could be a good tax saving idea

All in all, employing a spouse can often be a worthwhile venture for your business. There are many tax benefits (some listed above), that can be realised from doing so but it is essential that if you are thinking about taking on your husband/wife as an employee of your company that you do things by-the-book.

Please note, all our content is for general guideline only, every case is different and we would recommend speaking to us before taking any action as a result of the content. The content was correct at the time it was published. 

Keep ahead of the game with all the tax changes and new rates coming into effect from April 2019.

If you would like to speak with an advisor about getting better systems in place book your 10 minute chat at info@coopercurtis.co.uk

Take a look at our Summary from last week's Autumn Budget. If you have any questions about anything raised in the Budget please do not hesitate to get in touch with one of our team on 0845 303 1144 or email info@coopercurtis.co.uk.

You may be wondering why you have been sent a notice to complete a tax return, or whether or not you should be completing one for the year.

The list below explains when you need to prepare a self assessment, but should you need any further information, please do not hesitate to contact us; 

• You were self employed at any point of the tax year (runs from 6 April to 5 April)
• You received more than £2,500 of un-taxed income for renting property or from un-taxed savings
• You received dividend income of over £5,000 in the year
• Your investment income was £10,000 or more before tax
• You made a profit from selling a second property or shares and owe Capital Gains Tax
• You are a company director
• Your income was more than £50,000 and you or your partner claimed Child benefit
• You received overseas income and need to pay UK tax on it
• You lived abroad and need to pay tax on your UK income
• Your income was over £100,000 for the tax year
• You were trustee of a trust or registered pension scheme
• If HMRC have issued you with a tax return, you must still complete and submit it

If you would like any advice on whether or not you should be completing a Self Assessment, or would like help completing and filing a tax return, please call 0845 303 1144 or email info@coopercurtis.co.uk 

Post by Caroline

 Please note, all our content is for general guideline only, every case is different and we would recommend speaking to us before taking any action as a result of the content. The content was correct at the time it was published.

Tax-free Trivial Benefits

A little known and underused tax free perk is the trivial benefits exemption.

A benefit provided to an employee is classed as a trivial benefit and therefore tax free for not only them, but a tax deduction for the employer too, provided that;

1. It is less than £50, if given as a voucher it is non cash transferable,
2. It is NOT a reward for services,
3. And, it isn't included in the terms of an employee’s contract.

Examples

Trivial benefits could include, a gift voucher, a bunch of flowers, a meal out for employees under £50 per head.

To avoid the reward for service rule, the benefits could be given for a birthday, or a turkey or bottle of wine at Christmas, the birth of a child or a bereavement.

There is no limit to employees!

HMRC’s legislation does not state how many times per year you can give a trivial benefit to your employees. But be wise! Obviously a £50 gift every working day of the year would ring HMRC's alarm bells so we would advise that any trivial benefits made in the year are made as a gesture rather than a frequent payment.

Does this apply to company directors too?

Yes it does! To limit company directors taking advantage of this tax freebie, HMRC will allow trivial benefits provided to directors up to a value of £300 per year. So that’s a payment up to £50 once every two months. If your spouse is also a director that is another saving of £300 and a potential tax saving of £335 if both higher rate tax payers!

For more information on trivial benefits and other tax saving opportunities, contact Cooper Curtis on 0845 303 1144 or email info@coopercurtis.co.uk

POST BY CAROLINE

Please note, all our content is for general guideline only, every case is different and we would recommend speaking to us before taking any action as a result of the content. The content was correct at the time it was published.

Last week saw Philip Hammond deliver his first Spring Budget as Chancellor. There were a few shock announcements on the day, one being the dividends allowance now reduced to just £2,000 from next year prompting some in-year tax planning for our limited company clients. 

After a heavy backlash from his opposition about tax rises, the chancellor has now abolished his plans to raise the Class 4 National Insurance from April 2018 one week after delivering his budget bringing a sigh of relief to many self-employed people. 

The changes proposed where the contractors IR35 status will be decided by the public body they are contracted with is still going ahead beginning from April 2017. 

If you have any questions regarding any topics covered in the Budget or would like any advice, please give us a call on 0845 303 1144 or email info@coopercurtis.co.uk.

 Please note, all our content is for general guideline only, every case is different and we would recommend speaking to us before taking any action as a result of the content. The content was correct at the time it was published.