In accordance with your instructions I have now registered Peter as self employed from 13102010. It is probably better this way for a short while otherwise the business will become involved in onerous paye legislation and filing restrictions.
At 05 April 2011 we will examine this again and make sure that we are still satisfied with this self employed relationship.
In due course, like you, Peter will receive a tax return form 2011 that is sometime in May 2011. £120pw x 52 weeks = £6,240 which is below the personal allowance at 6435 in the current year. However this form will still have to be completed and I will complete this task on behalf of Peter.
However, Peter must register for the self employed stamp as the limit for this is £5,715 in the current year that is £110 per week. The rate that this is payable at is £2.30 per week and will be payable from 13/10/2010 and expect HMRC to get in touch with you quite soon about this (equals £2.30 x 7 weeks = £16.10 in total.)
However, please note that the deduction in the business tax is £120pw x 52weeks = £6,240 x 28% tax relief = £1,747.20 in a full year and in the first period 13/08/2010-30/04/10 is 235/365 x £1,747.20 = £1,124.91. The weekly cost therefore of employing Peter under a self employed contract is £120 less £120 x 28% (=£33.60) = £86.40 per week or £120 x (100% less 28%) 72% .
Therefore this relationship is good for you (less tax plus the pride of working with your son) and good for your son (he is learning a trade from a skilled gentleman tradesman.)
Retirement pension On a lighter note (all this talk about wages is heavy though necessary) I see that your retirement pension is now worth around £50,000 on a buy-out basis and considerably more as it now sits.) This was truly an astute move by you so early in your career and when you were so young. Yes, you contribute a lot of money. However, your pension is now worth a considerable amount; you will reap the benefits and will help to give you a really comfortable retirement. I have one client who is 87 and the insurance company has been paying him a private pension for more that 20 years and has aided a comfortable retirement. The same, but better, will apply to you. Congratulations!