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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am a self employed author. My husband does my covers, editing

Resolved Question:

I am a self employed author. My husband does my covers, editing and some idea generation. This year I am set to make over £50,000. I want to pay my husband for his services, but don't want to have to do a payroll every month. I obviously want to do this the most tax efficient way? What would you suggest.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site.

Thank you for requesting I help you with your question.

Please advise if this is going to be regular income for him or one off.
Secondly, what figure did you have in mind?
What does your husband do otherwise...you state his income is low?

Many thanks
Customer: replied 2 years ago.

I was intending to pay him every year. But I want to pay him in the most tax efficient and easiest way. He does a considerable amount of work that I would have to sub contract if he did not do it. He is a kleeneze retailer. I was planning to pay him around £8000 a year

Expert:  taxadvisor.uk replied 2 years ago.
Caroline, thank you for your reply.

If your husband is already self employed in his own right being a Kleeneze retailer, then your best option is to treat this cost as outsourcing work and he would declare it as income from self employment.

Just as one can have more than one employment, one can have more than one trade/business as a self employed sole trader. He would declare this income on his tax return and you would show this as an allowable expense. As you income may take you in higher rate tax band, and reduction in it would mitigate tax and Class 4 NI payable by you whereas your husband would be taxed at basic rate given his income with a lower charge for Class 4 NI.

There is also flexibilty in cross charging, depending on your income and likely tax charge....

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I asked an additional question below, but it seems to have gone to another question?

But because he only does this for me. Wouldn't it have to be considered as employment?
Could I pay him a monthly sum or would it have to be per job completed?

Expert:  taxadvisor.uk replied 2 years ago.
Caroline, I have copied my reply to your question here

I would structure the arrangement in a form of a service agreement.
If you wish him to be treated as self employed, you could agree a price per job and it is a fixed price.. if he spends more time than anticipated his internal rate of return drops. You could make payments on account (stage payments based on level of completion), or you could agree an hourly rate based on hours worked.

He would be treated as an employee if you paid him for holidays, he had fixed hours of work and the work pattern was the same week in week out, you paid him sick leave etc etc.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

That is not really what I asked. I wanted the easiest way possible without having to run a monthly payroll or do invoices etc. To do that I may as well just employ him as it is going to be as much work. Can I just pay him as an employee but pay it as a lump sum once a year or something along those lines?

Expert:  taxadvisor.uk replied 2 years ago.

Caroline, thank you for your reply.

If you have him as an employee, you have to operate a PAYE scheme.

You’re exempt from PAYE if none of your employees is paid £112 or more a week, gets expenses and benefits, has another job or gets a pension. However, you must keep payroll records.

More information on running a payroll can be found here
https://www.gov.uk/running-payroll

You can still pay him a lump sum once a year even if he is self employed. The payment terms and arrangement are negotiated between the parties to the agreement.

I was suggesting you an arrangement that is workable, simple and does not involve running a payroll or collecting many invoices. One invoice from your husband to your business would suffice.

I hope this is helpful.