Putting wife on PAYE

[simplyjoe]

Can a sole trader put his wife on PAYE thereby wideing their 20% band. What stamp applies A or S. I always thought that for this to happen a partnership would have to be formed. Recently a tax office employee told me that it was common for this to happen and that it was ok.

 

[Welfarite]

Your wife would have to be under a contract of service in order for her to be considered as an employee of the company. There is a section in SW that deasls with decididng such status, called Scope Section. I would advise you to contact your local soical welfare office and talk to the Information Officer or even a Social Welfare Inspector. there about the steps that need to be taken. If you get somebody experienced they will know what you are talking about. They will take into account things like can she be dismissed? does she work set hours? How much is she paid? Is there a contract of employment? Is she at liberty to send a substitute in the event of her not being able to work? You get the gist of what they'll want, which is toi ensure that the employment is bona fide and a job worked under the same conditions if she was not related to you.

 

[Clarkey]

Can a sole trader put his wife on PAYE thereby wideing their 20% band. What stamp applies A or S. I always thought that for this to happen a partnership would have to be formed. Recently a tax office employee told me that it was common for this to happen and that it was ok.

Yes your wife will be on an M stamp, no contributions and no entitlements. This saves you tax at the difference between 20% and your marginal rate (more than likely 41%) also you will not pay any p.r.s.i or health contributions yourself on this money as it comes off your profit. This is an extra 5%. Happens all the time.

 

[Joe1234]

You could look at the possibility of her joining the business as a partner, then she would pay Class S prsi, which could be benificial if she was to apply for the pension.

 

[woods]

You could look at the possibility of her joining the business as a partner, then she would pay Class S prsi, which could be benificial if she was to apply for the pension.

But if she owns more than 15% then her Tax Credit will be considerably less which defeats the purpose of the exercise.

 

[woods]

I have read somewhere that this practice has been outlawed in the UK and they are cracking down hard on it.
A lot of small family owned businesses are set to suffer as a result.

 

[extopia]

The OP is a sole trader, not a limited company.

But even if it's feasible, is it worth it? You increase your 20% band by a maximum of 25k, leading to a maximum income tax saving of €5,250 (the difference between the tax due on 25k at the higher and lower rates).

 

[Joe1234]

But if she owns more than 15% then her Tax Credit will be considerably less which defeats the purpose of the exercise.

The paye credit is not available to her regardless of whether or not her husband is trading as a limited company or sole trader.

 

[simplyjoe]

The OP is a sole trader, not a limited company.

But even if it's feasible, is it worth it? You increase your 20% band by a maximum of 25k, leading to a maximum income tax saving of €5,250 (the difference between the tax due on 25k at the higher and lower rates).

This is a huge amount of money. In 10 years you have €52,500.

 

[Graham_07]

The OP is a sole trader, not a limited company.

But even if it's feasible, is it worth it? You increase your 20% band by a maximum of 25k, leading to a maximum income tax saving of €5,250 (the difference between the tax due on 25k at the higher and lower rates).

€5,250 for a small amount of paperwork is definitely better of in the OP's pocket than in Revenue's. As long as the wife actually works for what she is paid. I have done this, she is on Class M, spouses working for spouse are not insurable under the social welfare acts. She does not get the PAYE credit but its still worth it.