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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have question regarding UK tax allowance and if it can used

Customer Question

I have question regarding UK tax allowance and if it can used all at once
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you expand on your question a little please. Are you self-employed or employed?
Customer: replied 3 years ago.

I own and work through a limited company. My wife (who is now an employee of the the same company) has a full tax allowance of £9000-something to use.


 


Is it possible to pay her a salary with the complete tax allowance split over three months?


 


Effectively that would mean that the company and her only pay NI in terms of taxes, correct?

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 3 years ago.

I also have an another question:


 


Say that I open a BVI company and buy in some computer servers to this company. My UK company then signs a server contract with the BVI company to lease the servers. Can the BVI company invoice my UK company and if so, what would the legal and tax implications be?


 


The servers would be an excepted business expense for my UK company as the company's main business is IT services. The BVI company would add a high gross margin to the server cost invoiced on to the UK company.

Expert:  TonyTax replied 3 years ago.
The personal allowance of £9,440 is given to employees over a full tax year which runs from 6 April to 5 April.

If your wife has not worked since before 6 April 2013, then she is still entitled to a the personal allowance for a full tax year but she won't get it all at once. We are just about to reach the end of month 8 of the tax year so your wife has £6,293 (£9,440 / 12 x 8) of unused personal allowance assuming she has no other earnings in the current tax year.

If you really wanted to use that in one month, you could but there would be quite a sizeable national insurance contributions liability for your wife as the employee and the company as the employer. The personal allowance is not used against national insurance contributions.

Take a look here and here for PAYE tax and NIC calculators. Put the amount you want to pay in each calculator to see the results of paying £6,293 in one month on 30 November 2013. The links to the calculators are at the bottom of each page. Use a tax code of 944L, indicate monthly for the pay period, indicate no to month 1 or week 1, £6,293 gross pay, zero in the next three boxes and a pay date of 30 November 2013 in the PAYE tax calculator. Choose monthly for the pay period, £6,293 gross pay and NI letter A in the NI calculator.

You will need to post your BVI question separately as it is on completely separate topic to the initial question so I'm not allowed to answer it as part of this question I'm afraid.

I hope this helps but let me know if you have any further questions.

or month 8 where an employee has had no earnings to date.
Customer: replied 3 years ago.
Hi, thanks for you answer. As I seem to understand the calculator results, how much NI would we need to pay a £6000 salary?
Expert:  TonyTax replied 3 years ago.
If you pay £6,000 in one month, the employee NIC will be £387.88 and the employer NIC will be £739.55. So it will cost the company £6,739.55 to pay your wife £6,000.

Expert:  TonyTax replied 3 years ago.
Hi again.

I'm wondering if there is anything else that you need clarification on since you have yet to rate my answer to your question. If not, would you kindly rate my answer so that I get paid for my work. Thanks.

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