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Confused about Tax - self employed AND employed elsewhere

(8 Posts)
mogwai Wed 23-Jul-08 21:03:52

My husband and I both work for the NHS. He works F/T, I work only 2 days per week. He is a higher-rate tax payer, I'm not.

We both also do locum (contractor) work and pay ourselves though limited companies where we pay tax on a minum wage and draw the profits as a dividend.

We both have NHS salaries which are taxed at source through PAYE.

My total income does not exceed £30k. His total income is well above this.

I know he's paying the right amount of tax via PAYE but how do we know he won't get stung for a tax bill if he has to complete self assessment?

Flocci Wed 23-Jul-08 21:28:14

The salaries you are drawing through the limited companies need to be taxed via PAYE as you are employed by those companies and drawing a wage. The dividends you are receiving need to be declared on your self assessment also and will be taxed at your marginal rate of tax ie 40% for your partner and for you it depends on whether you are pushed into the higher band or not.

Whoever is administering the limited companies can work out the PAYE via the Inland Revenue's tax tables and also wrok out how much tax is also payable on the dividends so the self-assessment won't be too much of a shock.

ChasingSquirrels Wed 23-Jul-08 21:36:59

There is no IF he has to do a self assessment, he does have to, and he needs to inform HMRC if this.
He WILL have tax to pay on the dividends.
Dividends aren't taxed at 40%, if you are higher rate they are taxed at 32.5% of the gross (ie 25% of the actual receipt).
If he is higher rate then you should keep 25% of all divi's paid through the company as a tax reserve.
If you are both earning elsewhere it seems pointless paying a minimal salary through your personal companies (minimum wage implications can be avoided by being directors without service contracts), take it all as dividends...unless of course there are IR35 issues.

morningpaper Wed 23-Jul-08 21:38:28

If you are fiddling your tax then you need a proper accountant

ChasingSquirrels Thu 24-Jul-08 00:16:49

lol @ morningpaper - v true

mogwai Fri 25-Jul-08 22:30:26

not sure we are actually fiddling our tax?

canofworms Fri 25-Jul-08 22:42:19

Your situation is identical to ours. I work 2 days a week for the nhs and dh works full-time for them.

We have our own limited company - I do the paperwork/books etc and am company secretary so I take a nominal wage to cover this. Dh takes no wage at all to keep him out of the higher band of tax. We pay tax on the profit and the dividends which is less than the 40% he'd pay if he took a wage.

I advise that you get a really good accountant. We don't fiddle our tax but we pay as little of it as possible iyswim

ChasingSquirrels Fri 25-Jul-08 22:44:44

no, you aren't fiddling it - you are using the system. I would agree with the previous poster that you need an accountant though.

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