Income allocation to my wife

What is the best way to allocate income to my wife?

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I am a higher tax earner, I work full time and also I am a shareholder at a small company. I am due some profits on monthly basis however due to a high tax bracket, I would rather allocate them to my wife. I would also prefer if my current employer would not know that I have a second income. What is the best way to do this according to regulations? Can my wife become an employee of the small company and receive a salary (she would perform some tasks) or possibly she could receive income in form of didvidends? Any advice is appreciated, I am happy to jump on a call or a zoom as well.

thank you

Replies (30)

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By Wanderer
27th Apr 2021 16:40

This is exactly the sort of thing accountants do & advise on day in & day out. What does the accountant to your small company say?

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By Mags123
27th Apr 2021 16:44

I am trying to get some independent advice for a second opinion. Thank you

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By Duggimon
27th Apr 2021 16:50

My advice would be to listen to the person you're paying for advice and who knows you rather than strangers on the internet.

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Replying to Duggimon:
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By Mags123
27th Apr 2021 16:55

It’s an accounting web where people post questions of accountancy nature, like this one. Maybe you have confused with another place. Thanks for your input though.

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Replying to Mags123:
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By DaveyJonesLocker
27th Apr 2021 16:58

You're the one with confusion. This site is for accountants to ask other accountants questions.
Not for freeloaders. It's bad enough people coming on here asking questions which should be paid-for advice but you're expecting others to give up their time to "jump on" to the phone or Zoom? Hilarious.

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Replying to DaveyJonesLocker:
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By Paul Crowley
27th Apr 2021 17:55

As Anon hilarious
No PM possible.

I note that OP once self declared states unemployed
If I could be high rate tax payer as unemployed, why do I bother with all this accounts and tax stuff

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Replying to Mags123:
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By legerman
27th Apr 2021 17:17

Quote:

It’s an accounting web where people post questions of accountancy nature, like this one. Maybe you have confused with another place. Thanks for your input though.

In general, options are give your wife some shares in relation to how you want to split the dividends. Make her a Director and pay her for doing that. Make her an employee and pay her a salary in proportion to the role. (you seem aware of that in your op) or any combination of the three. There may be other options, which is why engaging an Accountant would be beneficial to you, as he/she can offer advice tailor made to your circumstances, so Duggimon's suggestion is spot on.

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By Mags123
27th Apr 2021 17:24

Thank you

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By Paul Crowley
27th Apr 2021 17:31

Love it when an Anon newbie freeloader tells the resident panel what the site is for

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

'If there is an element of personal or professional sensitivity in your question, there is an option to post it anonymously. Please do not abuse this facility - your identity can be checked by the site moderators. There is no anonymous posting option for comments on threads. Should you come back to comment below your anonymous question, your site ID will be visible to other readers.'

Users are free to seek clarification for technical issues that are troubling them, but tax and accounting can be very complex. Any Answers conversations can get very involved around what the legislation says and how different people interpret the regulations. As one member wisely advised: “If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice"

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Replying to Mags123:
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By lionofludesch
27th Apr 2021 17:21

Quote:

I am trying to get some independent advice for a second opinion. Thank you

Unless you're prepared to disclose a lot of personal information (which I wouldn't recommend), your existing adviser is always going to give you better advice than strangers on the internet.

Some things you might like to consider.

You speak of dividends. Dividends are paid in proportion to shareholdings. Are you prepared to transfer shares to your wife ?

Salaries must be fair reward for the work performed. It's unclear what you mean by "some tasks" but a bit of light dusting on Monday mornings may not meet the mark. You could also saddle her with an NI bill as well as the tax which would eat into your own tax savings. Obviously, there are many "ifs" in there as you (rightly) disclose little but it needs to be considered.

Why do you think HMRC will tell your employer about your company ?

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Replying to lionofludesch:
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By Mags123
27th Apr 2021 17:33

Thank you for your response, very helpful.

I might be wrong here but I believe that if I get a second income, my tax code will change and my current employer will be notified. Second job would not be looked upon favourably.

I believe going down the path of employment of my wife could be a solution, her current earnings are within a lower bracket of tax. It would be a legitimate employment on part time contract basis. I need to understand what level of tasks above “dusting on Mondays” would fulfil the mark as she is in full time employment.

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By lionofludesch
27th Apr 2021 17:52

Quote:

Thank you for your response, very helpful.

I might be wrong here but I believe that if I get a second income, my tax code will change and my current employer will be notified. Second job would not be looked upon favourably.

If you're a higher rate taxpayer, it seems unlikely. If you were earning below the personal allowance, you'd probably be right.

Quote:

I believe going down the path of employment of my wife could be a solution, her current earnings are within a lower bracket of tax. It would be a legitimate employment on part time contract basis. I need to understand what level of tasks above “dusting on Mondays” would fulfil the mark as she is in full time employment.

What is she doing ? What's the going rate for it, as paid to an unconnected person of similar skills ? How many hours will she work ?

Once you have all that, it's a matter of arithmetic.

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Replying to lionofludesch:
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By Mags123
27th Apr 2021 19:33

Thank you, all noted.

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Replying to lionofludesch:
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By Paul Crowley
27th Apr 2021 17:35

That could be the first opinion from the paid for accountant
If so good idea to get a second opinion here

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Replying to Paul Crowley:
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By Mags123
27th Apr 2021 17:39

Thank you, I might have gone about it wrong way round but nonetheless, I am grateful for the comments.

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By Tax Dragon
27th Apr 2021 17:06

.oO Duggimon. Member Since: 19th Jun 2015. Likes: 11 Thanks: 2513
.oO Mags123. Member Since: 27th Apr 2021. Likes: 0 Thanks: 0

Yep, Duggi's the confused one.

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By justsotax
27th Apr 2021 17:12

What was the first opinion....or have you not asked that yet.

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By Mags123
27th Apr 2021 17:34

Thanks for asking, no, I have not asked yet. I am trying to be a bit less clueless ahead.

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By Paul Crowley
27th Apr 2021 17:46

So not really a second opinion

Take the first opinion from your accountant and listen. He knows you.

First thing to consider is how much other income wife has and even does she contribute or qualify for state pension. Critically per Lion, she must do some actual proper work for the company to get wages paid and tax relief in company. If she does not then we are talking closer to evasion than avoidance

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Replying to Paul Crowley:
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By Mags123
27th Apr 2021 19:36

Absolutely, I want to make sure it is all according to legislation. It is very insightful to read all comments, thank you.

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By Matrix
27th Apr 2021 17:44

A BR tax code should be used for a second employment. The tax code for your main employment shouldn’t change but, if it did, then it is none of your employer’s business. The payroll person just applies the code. I pay no attention to codes for employees who aren’t clients.

Just ensure that your accountant knows what they are doing and post the original opinion on here if you wish. Although, if you don’t trust your accountant then change, there are plenty of very capable accountants who come across this type of question regularly.

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By lionofludesch
27th Apr 2021 17:55

Quote:

A BR tax code should be used for a second employment.

Or D0.

But we are assuming employment. Dividends wouldn't be covered at all. And the employer is not told how the code is made up.

It's a non-problem.

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Replying to Matrix:
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By Mags123
27th Apr 2021 19:36

Thank you for your comment

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By tom123
27th Apr 2021 18:34

Bear in mind your contract of employment What does that say about 'second' jobs. I would presume they have to be disclosed.

Are you potentially in competition?

Bear in mind if you are director your current employer could search for you anyway on companies house, if they were so minded.

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Replying to tom123:
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By Mags123
27th Apr 2021 19:37

Thank you, I am mindful of that.

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By lionofludesch
27th Apr 2021 18:43

Does the OP have another job ?

We hear talk of "shareholdings" and "dividends" ?

They aren't jobs.

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By tom123
27th Apr 2021 20:27

I was thinking of this bit:

I might be wrong here but I believe that if I get a second income, my tax code will change and my current employer will be notified. Second job would not be looked upon favourably.

but I see now that probably relates to the wife.

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Replying to tom123:
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By lionofludesch
27th Apr 2021 20:41

Quote:

I was thinking of this bit:

I might be wrong here but I believe that if I get a second income, my tax code will change and my current employer will be notified. Second job would not be looked upon favourably.

but I see now that probably relates to the wife.

No, I think the OP sees this as a job whereas I see it as an investment.

Either way, it's largely irrelevant.

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By bernard michael
28th Apr 2021 09:20

What is the business or trade of the "small company"

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the sea otter
By memyself-eye
28th Apr 2021 11:05

Conducting research on accountants?

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