Looking at changing to a partnership?

[Paraplanner]

Hi Everyone,

I am new here and looking for some advice please.

I am currently employed earning approx. £40k and also a self-employed sole trader and profits have been around £20k for each of the last three years. My partner (not married) earns around £27k employed and does some light admin work for me.

I’m thinking about forming a partnership with her and giving her say 25%. That way approx. £5k will move over to her, she will pay 20% tax instead of my 40% tax, she won’t pay any class 4 NI instead of my 9% and we will also get to keep some of our child benefit as I’ll be under £60k..

Does this sound ok? Do you think HMRC would be ok with it or would they expect her to be treated as an employee? Also I gather doing it this way would mean three returns each year, one for me, one for her and one for the partnership. I have hardly any expenses or anything complicated so I do my own tax returns – would that still be possible with a partnership?

Finally I currently just have a personal account for my self employed business, would I still be ok to keep using that or would they expect me to open a joint business account? If I can use my existing account would I be expected to physically transfer 25% of the profits over to her account to show an audit trail?

Many thanks in advance to anyone who responds.

Cheers

[bd6759]

Why not just employ her at £100 per week?

[Paraplanner]

I did think about that originally but would that mean I would have to set up a PAYE scheme and pay NI etc as she has other earnings of £27k?

[Paraplanner]

Actually just realised there would be no employee or employer NI as it's below the threshold and the other income has no bearing on it. Thanks bd6759 I'll look at doing it that way instead.

[bd6759]

You will need a PAYE scheme becaus she has other earnigs. But it is proobably cheaper than setting up a partnership, and all the problems that may bring.