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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

AIBU to expect DP to cover the extra personal tax I'm liable for after become a 'director' of his company??

259 replies

bedknobs72 · 14/01/2019 13:44

I'm a SAHM.
DP gives me £300 a month for personal expenses and I get a little income from my old flat that I rent out. DP has a small business and has made me a co director as he said it would be more tax efficient. There is a joint account for big family expenses

I always do a Self-Assessment because of the rental income. However, now that DP has made me a director of his company I have to declare my 'earnings' and the dividends that I 'get' from his business. This means my tax bill is twice as much. I'm happy to pay the tax owed for the flat income as I had factored that in and put it aside from the flat income. But I sort of think DP should be paying the excess that I am now due because I've been put down as a director of his business? AIBU? DP certainly things so. He hit the roof when I suggested it seemed unfair and said that if 'he' paid for it I would be getting more money than him as he also only has a about £300 a month left over for personal expenses.

Still seems not quite right to me though. I agreed to being Director as I thought it would bring the overall tax bill for the business/him down. I didn't think I would start having to pay tax on the money I was suddenly 'earning' . I have had no change in the monthly money I get and I don't have any more for the increased tax bill.

I said to DP that if he had a job rather than owned a business ( and brought in the equivalent amount of money) he wouldn't be expecting me to give him half of his PAYE tax figure.

DP is getting very angry that I'm even suggesting that this seems unfair.

AIBU??

I genuinely don't know if I'm being a selfish unreasonable cow or if I have a point?

OP posts:
LannieDuck · 14/01/2019 17:50

yes I left a six figure job after my 3rd child

This is sounding more like an ego-trip on your DH's part.

You were the higher earner, you stopped work to be a SAHM and support his business... which doesn't earn enough to support the family. But he doesn't want you to go back to work.

The two of you need to take a step back and consider whether to switch roles. With a 6-figure salary, it would be possible to have one parent continue to stay home with the kids... it would just have to be him instead of you.

LannieDuck · 14/01/2019 17:53

Infact, he might not have to give up the business completely, but he could drop to PT and still facilitate the family.

UpAndDown89 · 14/01/2019 17:57

The whole setup sounds wrong and benefits only one person in that relationship. He doesn’t seem to respect or care about you very much. Go out there and get a job NOW. I’ll bet if you actually try to get a job he’ll make your life v difficult.

Grace212 · 14/01/2019 17:59

now I'm really confused

it sounds like the company actually is doing well?

Helplessfeeling · 14/01/2019 18:08

In your shoes I’d be handing in my notice and resigning as a director.

Of course he’s BU, you shouldn’t be out of pocket for becoming a director in the company. You should be better off, or in the same situation but definitely not worse off as a result

This. When my DH had a business we had a similar arrangement but we always put aside the tax money first so no one lost out.

StatisticallyChallenged · 14/01/2019 18:14

The company is making money, but it's not growing and the amount it's making isn't enough to cover the family's costs when OP used to earn a large salary.

StatisticallyChallenged · 14/01/2019 18:17

OP, how do the company earnings compare to the salary he could earn if he worked in a similar field ?

MulberryPeony · 14/01/2019 18:27

As per a previous poster - getting the company to pay your pension is more tax efficient. An IFA would’ve able to advise on whether you can move your current pension pot and make sure the pension is doing the best for you.

On the positive side it sounds like the business is making money and not loosing it.

timeisnotaline · 14/01/2019 18:31

He has a pension (inheritance etc) , you don’t and you’re not married. That means you should get a job I think.

Original poster
bedknobs72 · 14/01/2019 18:42

Thanks for all replies as helps to get different perspectives on it.
Talked to DP again and he kept saying I was confused between Business Tax and Personal Tax and that Personal Tax means I'm liable to pay it personally! Argh!! Asked him where he thought the money might come from and he said it would have been sensible for me to put aside money for tax from the £300 I was getting each month - i.e. the money we were paying ourselves after paying into the joint etc. I said that the money I'm liable for tax on has mainly gone into the joint - rather than into my individual pocket so I should obviously be able to take it out of the joint to pay it. I think he finally realised that this was fair. Unfortunately there isn't any money in our joint account - certainly not enough to cover two tax bills ( because if I take it out of our joint account then he says he will too)

OP posts:
flowerpott · 14/01/2019 18:43

This sounds like a mess.

I'm a director in my brother's business (I put money in initially) and know all the ins and outs financially. You need to be aware of the company financials as a director and as a shareholder, you have legal responsibilities. If your DH isn't sharing the full picture with you, I'd be resigning ASAP, or pushing for equal partnership with full oversight (if you have the time/capacity to).

I'm guessing the dividends are taken as drawings, if you don't have the cash to pay the tax bill? In which case, do they square up to < 80% of profits? If not, you're on dodgy ground. If you're taking director loans, then that's one thing, but the tax on those is 32% (I think - I'm not an accountant, I'm sure somebody else can advise specifically).

As for your household finances, that's up to you/your DH, but I don't see how you can be expected to pay tax out of money you haven't received.

Original poster
bedknobs72 · 14/01/2019 18:46

don't see how you can be expected to pay tax out of money you haven't received

I have received it because it's gone into the joint account but DP doesn't think I should pay 'my' tax out of the joint account!

OP posts:
ShalomJackie · 14/01/2019 18:55

Going forward any money that goes into the joint account in reapectnof your purported income from the company immediately take out the tax element and put it aside for tax. Seriously change accountant too if they have not already advised to keep a tax reserve account.

Personally as you are not even married I would resign as a director. If as it seems you are alao a shareholder have rhe dicidends paid to your account retain the tax element and pay remainder into joint account if youndecide to!

Stickerrocks · 14/01/2019 18:56

Well, as the company has paid you £20k of dividends, you should have received £20k of dividends, rather than just letting Lord Bountiful give you £300 of pocket money each month and allocating the rest to bills in your joint account. As you have saved him tax, morally he should be paying your tax bill from his savings, as he is paying less than he usually would. I think you two need to sit down and have a sensible conversation about protecting your personal financial situation, rediscovering your career and what he can do to build the business.

Belle1616 · 14/01/2019 18:58

It also means of his business goes under you are liable for debts, I wouldn’t of agreed to this.

Stickerrocks · 14/01/2019 18:59

Flowerpot the 32.5% dividendc5ax rate only applies if you are a higher rate tax payer. It's only 7.5% if you pay basic rate tax, which is why the op's DP has given her shares.

jellycat · 14/01/2019 19:02

Most of the tax liability must be due to the dividend income not the £300 per month. Even if your rental income is more than the personal allowance, the extra tax on the £300/ month would be £720 at basic rate. So maybe it would be reasonable to pay that out of your account. But if the dividends have been paid into the joint account the money to pay the tax liability should be paid from the joint account IMO.

Are you liable to pay payments on account for the first time because of this? That will make this bill seem particularly high (because you will be paying the tax liability for the 17-18 year plus half of the estimated of the liability for the 18-19 year.

Grace212 · 14/01/2019 19:05

OP "DP doesn't think I should pay 'my' tax out of the joint account!"

well, until this mess is sorted, that's exactly what you should do.

HoliestGoat · 14/01/2019 19:08

A director has legal responsibilities, and it doesn't sound like you are aware of these. That is a huge personal risk for you.

Resign, for your own sake.

Original poster
bedknobs72 · 14/01/2019 19:10

@jellycat - the £300 is probably misleading - that is just the amount DP said we can each afford to have as 'our' spending money.I am liable for tax on the dividend money and on my salary - which is around £8k a year. I also have a flat ( I wouldn't expect DP to pay tax of money on that rental income) which is what eats up my personal allowance.

The salary and dividends get paid into our joint account and then £300 comes out each into our personal account. ( DP also has savings and income from his own flat)

I've been trying to persuade DP that I shouldn't be having to
'find' the money from elsewhere - ie put it on my credit card or something to pay tax bill - I should be able to pay it from the actual dividends or salary which got paid into the joint account.

I think DP has just accepted this but I now wish he'd apologise for calling me unreasonable and unsupportive ( I think he must be v stressed about money)

OP posts:
ChipsAreLife · 14/01/2019 19:10

Well done on generating the additional income for the business. If I were you I would be focusing on growing this to cover your living costs.

I think your DP is being really unfair, you should be a team as a family. It sounds like he's taking the piss big time

flowerpott · 14/01/2019 19:17

@Stickerrocks It depends if the dividends are paid as true dividends (after filing, from last year's profits) or before, in which case they are director loans. Taxes on director loans are much much higher than dividends.

Original poster
bedknobs72 · 14/01/2019 19:18

@chipsarelife - thanks. I'm actually quite proud of the extra money I've been generating, it's a whole new revenue stream - I suppose it's been important for me to feel like I'm 'contributing' something tangible having left my 'proper' job.

I think the fact that DP has ended up having to pay his tax bill and the company tax bill from his personal savings ( because he didn't put anything aside) means that he thinks I should too otherwise it's unfair...

OP posts:
PattiStanger · 14/01/2019 19:19

You say that you run the payroll for the business, why isn't the "personal" tax being taken off before the money goes into the joint account and paid automatically each month?

Gentlygently · 14/01/2019 19:20

I think you have 3 problems here:

  1. Firstly, you haven't fully understood the exact situation. I say this because of your comments about whether or not DP is/was a higher rate taxpayer, and also your comment about 'DP says we haveto get the same amount of dividends' rather than, for example 'as we own the company 50:50 we receive the same amount. You seem to have taken a very passive role in something that could have significant consequences for you. You need to solve this but if you are capable of earning a 6 figure salary I am sure you are capable of understanding the issues here.
2.Secondly, you and your DP don't seem to share information about finances. This is a problem if you are supposedly planning a joint future together.
  1. Thirdly, from what you said, your joint finances don't seem to be able to support your joint lifestyle. But don't focus on that exclusively without solving the other two problems as well.