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Muhammad Haider
Muhammad Haider,
Category: Tax
Satisfied Customers: 817
Experience:  Director at HM Accountax
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I am a sole trader working as a digital marketing

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I am a sole trader working as a digital marketing consultant. For the past three years I have been working with a client who paid my a specified rate per hour for my work. I, in turn, contracted some of this work out to my wife who is an SEO copywriting specialist and she invoices me on a monthly basis for the work she carries out. Over the last two months, I have taken on a couple of new clients and have also been contracting her to carry out work for me for those new clients too. The new clients are paying me quite a lot less on an hourly basis than my initial client, which means that my wife's rate we've been using is actually more expensive than what I've charged the new clients. Should she decrease her rate to accommodate the rate change from the new clients, or should she continue to charge me the same rate as before for continuity's sake for HMRC? If you could give me your thoughts, I would be very grateful.
JA: Have you talked to a tax professional about this?
Customer: NO
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: Thus far, my wife has been making circa £6k per year and is under the £12,500 (? not sure if that's the correct number for not needing to pay tax) per year and I've made £28k net, £47k net and £35k net for the past three years since becoming self-employed should this be of interest.... I think my wife will likely be in the tax making bracket in 2021/22 though - thanks


I am an advisor at JA and happy to assist you.

It purely depends upon you and your business model. If you the client is paying you less then you need to decide whether you continue paying her same rate or reduced rate. As a business, I'll be inclined to pay her less rate. If you continue paying her higher rate then HMRC might consider it as income shifting.



I hope this answers the query.

Muhammad Haider and other Tax Specialists are ready to help you
Customer: replied 1 month ago.
Many thanks, that's what we thought.