Specialist Dental Accountants for over 28 years - Call 020 8346 0391
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Specialist Dental Accountants for over 28 years - Call 020 8346 0391 |
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He (Mac) has helped me as my practice has expanded from single-handed to a six surgery/8 dentist practice. |
T17 - Should you pay your Spouse more than £380 p.m, even if this creates a tax and NIC liability*? (BASED ON 2003/2004 RATES) FOR WORKINGS RELEVANT FOR THE 2004/2005 TAX YEAR, PLEASE CLICK HERE.
(*Figures assume spouse has no other taxable pay) (**Tax relief calculated from the employer's viewpoint at 41% assuming employer will be a higher rates taxpayer.) Of course, in order to satisfy the Inland revenue, you must ensure that you do not pay your spouse more than the commercial rate for the work he/she does. Please see Schedule A for breakdown of column 4. Please see Schedule B for a full explanation of how the figures have been calculated for illustrative example (g) (in yellow).
Schedule A - Breakdown of column 4 (Cost of spouse payments)
Schedule B - Explanation of how figures have been calculated for illustrative example (g). Option g Savings from paying spouse £1,600pm (19200 per annum) Costs Step 1 Employee tax 19200 - 4615 = 14585. Of this 1960 will be taxed at 10% (196) and the remaining 12625 at 22% (2777.50) giving a total of 2973.50 Step 2 Employee NI 19200 - 4615 = 14585. This at 11% is 1604.40 Step 3 Employer NI 19200 - 4615 = 14585. This at 12.8% is 1866.90. This gives a total cost of £6444.70. (Note: extra NIC of 1% only applies over £30940). Savings The salary is tax allowable (19200 at 41%) giving tax relief of 7872. The NIC'ER is tax allowable (1866.88 (from step 3) at 41%) giving tax relief of 765.42 This gives total tax relief of 8637.42, which after deducting the costs of 6444.70 (from step 4), gives a net saving of 2192.69. From this, if you deduct the savings from a salary of £380 p.m (380*12 = 4560. This at 41% gives 1869.60) you are left with £323.09, this being the saving on increase from £380 p.m to £1600 p.m) Other Points to Consider Although PAYE liability is payable earlier, a higher rate of pay may not only be regarded as more realistic, but will also make it possible to make higher payments into am Employer Pension Scheme. The Employee will also benefit from Sickness and Maternity pay and state pension. (basic + Earnings related). Married higher rate tax payers employing a spouse should consider this. For further discussion, please speak to Mac Kotecha.
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We take great pride in our service, and would be delighted to invite you for a free 1 hour, no obligation meeting at our comfortable offices. Simply call us on 020 8346 0391 to arrange a mutually convenient time. This web-site was last updated on 29/07/2008 Specialist Dental Accountants for over 27 years. Copyright © 2003-2008 Mac Kotecha & Company. All rights Reserved. The information on this site is for general guidance only. It is essential to take professional advice on specific issues about their impact on any individual or entity. No liability can be accepted for any errors or omission or for any person acting or refraining from acting on the information provided on this site. We can still help you if you're not a dentist. Please click here
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