New business advice please....money

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The Ox

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I'm thinking of setting my missus up in a small cafe business, has anyone on here ever employed their partner ?
Is it best practice to set up a Ltd company and me be the 100% Shareholder and pay her wage or do 50/50 pay her wage and I take the dividends ? If I employ her, could I pay her £11k to remain under the tax threshold and then top her up with cash out of my own pocket ? It's only a small business which I anticipate would turnover approx £40/£45k, pay her £20k, overheads will be approx £13k (very minimal costs) leaving between £7k/£12k. Obviously it's nothing massive my end but will provide some nice pocket money if my sums are correct.
 
A couple of points. Paying dividends isnt as good as it was, the tax man has changed it. If you pay yourself a dividend on top of your normal wages and it takes you over the 40% tax threshold you will be taxed at that rate, (40%) gone are the days when no matter how much you earned it was tax free (to you as an individual)
For that reason if you set it up as a limited company name the two of you as Directors, pay your wife minimum wage and you can share the dividend out between you, if neccasary paying her a bigger dividend.
Your wife can be both a Director and an employee. you will have to pay her minimum wage, £7.20. x 40 hours a week x 48 weeks = £13,824. OK she could do less hours and then top her up with Directors dividend.

The danger is surely she will need to employ someone else ? Holidays ? 6 day week ? then it is a nightmare, sick pay, pension, maternity.
 
The Ox said:
I'm thinking of setting my missus up in a small cafe business, has anyone on here ever employed their partner ?
Is it best practice to set up a Ltd company and me be the 100% Shareholder and pay her wage or do 50/50 pay her wage and I take the dividends ? If I employ her, could I pay her £11k to remain under the tax threshold and then top her up with cash out of my own pocket ? It's only a small business which I anticipate would turnover approx £40/£45k, pay her £20k, overheads will be approx £13k (very minimal costs) leaving between £7k/£12k. Obviously it's nothing massive my end but will provide some nice pocket money if my sums are correct.
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If you're aiming for those levels of turnover you're probably better off sticking as a sole trader - the reporting obligations on yearly accounts are far less strict and you can do them yourself with a little bit of knowledge. Limited companies need to submit statutory accounts and a corporation tax return.
 
aguero93:20 said:
If you're aiming for those levels of turnover you're probably better off sticking as a sole trader - the reporting obligations on yearly accounts are far less strict and you can do them yourself with a little bit of knowledge. Limited companies need to submit statutory accounts and a corporation tax return.
Click to expand...

Aguero, you are far more financially astute than I am so i will ask the question, if he (she) is a sole trader how can he pay his wife minimum wage ? are you saying she is better off running it and taking all the profits ?
 
Blue Mist said:
Aguero, you are far more financially astute than I am so i will ask the question, if he (she) is a sole trader how can he pay his wife minimum wage ? are you saying she is better off running it and taking all the profits ?
Click to expand...
Sole traders are allowed to employ staff mate.
 
Blue Mist said:
A couple of points. Paying dividends isnt as good as it was, the tax man has changed it. If you pay yourself a dividend on top of your normal wages and it takes you over the 40% tax threshold you will be taxed at that rate, (40%) gone are the days when no matter how much you earned it was tax free (to you as an individual)
For that reason if you set it up as a limited company name the two of you as Directors, pay your wife minimum wage and you can share the dividend out between you, if neccasary paying her a bigger dividend.
Your wife can be both a Director and an employee. you will have to pay her minimum wage, £7.20. x 40 hours a week x 48 weeks = £13,824. OK she could do less hours and then top her up with Directors dividend.

The danger is surely she will need to employ someone else ? Holidays ? 6 day week ? then it is a nightmare, sick pay, pension, maternity.
Click to expand...

They have changed the rules again in that you get the first £5k dividend tax free and over that you are charged 7% tax on them up to the 40% threshold.
 
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