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Where Taxpayers and Advisers Meet

Wife as only employee? Rental income

cascas
Posts:35
Joined:Sat Jan 01, 2011 10:57 pm
Wife as only employee? Rental income

Postby cascas » Mon Oct 04, 2021 12:22 pm

I am a landlord who is taxed on rental income,

My wife does work for the rental properties (I no longer use a agent), and so I should be paying my wife for the work done (she has no other income).

Does anyone employ their partner under PAYE (as their only employee?) Most people seem to employee partners as "self employed" or through a incorporated company (perhaps with larger payroll). I beleive that this is actually a employee rather than self employment. I am thinking around about 10% of rental income as a guide (which is less than the cost to the agent).

As it would be over £120/wk but below the NI threshold it seems to also have the benefit of covering NI credits.

It does seem a little "odd" though to register as an employer and only have 1 employee (who is your wife). Is this more common than it sounds? Any issue in registering for PAYE (as a landlord) and having 0 employees? Are returns etc still required.

If I do this, I am thinking about running payroll through a bureau as it should be a low cost options (as a micro entity / free plan)

Jholm
Posts:219
Joined:Mon Mar 11, 2019 4:22 pm

Re: Wife as only employee? Rental income

Postby Jholm » Mon Oct 04, 2021 1:36 pm

There is scope for it but it seems overkill to me.

If she has no other income, why not do a one-off deed and transfer her a % in the property, and then divide the rental income between you? This would make the most of her personal allowance and reduce the amount taxable on you.

It may still be more cost effective to do this and get her to pay voluntary NIC contributions of approx. £150, thereby retaining the year as a qualifying year for state pension purposes.

cascas
Posts:35
Joined:Sat Jan 01, 2011 10:57 pm

Re: Wife as only employee? Rental income

Postby cascas » Mon Oct 04, 2021 3:18 pm

This is a very good point. Benefit of employing is that no transfer of equity is required (in reality not so much an issue as you are married anyway).

Benefit of transfer is that you dont need to run a "payroll" disadvantage is that it another SA100 to complete (none at moment)

Through employment, from a tax point of view. If less than £8840 then no NI would be due - and all income would fall under Personal Allowance. This would reduce my income, and £1786 tax at basic rate.

If we used transfer, then If the personal allowance is used in full then the full £12570 could be tax free. This would reduce my tax by £2514, and after Paying Class 2 (Voluntary) at £3.05 week. still results in a tax reduction of £2357/yr (and benefit from making voluntary NI contributions)

If employed at full Personal Allowance rate, this would incur 360 in employee NI, and 447 in Employer NI (total 874), and reduce my tax cost by £2514, but cost £874 in NI. Net reduction £1640

Jholm
Posts:219
Joined:Mon Mar 11, 2019 4:22 pm

Re: Wife as only employee? Rental income

Postby Jholm » Mon Oct 04, 2021 3:32 pm

Also bear in mind the potential future sale, which also benefits from ownership being split across you both.

Payroll isn't my forte but I understand that the payments need to be relative to the work done, which would give you less flexibility than just being joint landlords sharing profits.

Also, consider transferring in unequal shares, such as 99% and 1% as 50/50 isn't always the most beneficial.


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