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

[bedknobs72]

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?

No wonder you are frustrated Op. In your situation I would be too.

My solutions would be to make sure I could actually afford to move back to my running away flat if I had to and to have a big running away fund in the bank in my own name.

Who owns the property you actually live in and does it have a mortgage? Might it give you more financial security if you owned it rather than keeping your rental property? This could potentially simplify the tax situation also. Your DP would still have a property separate and paid for.

He needs to put the whole personal tax liability a month into a separate account each month and not into the joint pot for expenses.
If that means you both have less than 300 a month to spend then so be it, your income tax is a family expense.

If this is your first year as a director you effectively pay double tax as you'll pay what you owe this year and a payment ahead for next year, for the same amount.

Nada, get it off your chest. I suggest that £300 a month (£10 a day) is not all that much, depending what it has to cover and how much income you have elsewhere. The problem is that you don't seem to have the full picture and when you query his decision he becomes abusive. Either he is feeling defensive about his incompetence or he's taking you for a ride. Either way you need to get stuck in and protect yourself or get out of the business and leave him to it. It seems like you are doing the bulk of childcare but he still thinks it's ok to keep loads of personal savings. I hope you co own the house you live in, have wills and a clear understanding of what you get out of this relationship

@howabout Our flats are our 'single life' flats - mine is a 1 bed, his is a studio. I couldn't move back to mine as I have 3 children at school and it's in a different area ( + we wouldn't fit!)

If I did have a running away fund I'd have to keep it secret as DP would think I should be dipping into it to pay my tax and top up the joint account when it ran low ( like he does)

Our family house is tenants in common so we own 50/50 - but he does often remind me that he put a bigger deposit in ( his Mum gave him the money) I also contributed a deposit but was lower because I had to save it up myself. I think if we split and I expected 50% of the house he'd be outraged ( although legally I think that's the position)

Feeling down about this today. Has escalated in my head to splitting up proportions. Honestly I think money will be the ruin of us..

It's clear that he doesn't have either the ability to run a business properly and/or his business just isn't profitable enough to be sustainable.

Expecting you to pay for his poor performance is slightly financially abusive, the fact that a grown man is surviving on payouts from his parents would be a total turn off for me, he's playing at business with someone else's chequebook.

presuming it's a limited company as a director you are not liable for the companies debts

I know this was a while back but just wanted to point out that this is incorrect. If for example the company trades whilst insolvent (pretty easy to do) then directors become liable for debts. There are a few other examples too.

A ltd company is not a get out of jail free card for people who run businesses incompetently.

OP your partner is an asshole. Why don't you go online and check out how much CMS he would be liable for three children and show him that amount-surely that's going to be a larger amount then the measly 300 you receive from him or the tax bill? I'd be livid and rethinking my relationship with him

'Remind him' how much you bled to have your three children and that his failure to support you emotionally / physically meant that you had to give up your 6 figure salary. Then remind him just how much your tax free sum was that has now been bled dry.

Then when that has worn off.. tell him that for the sake of your relationship and the future of your three children you both need to sit down and talk things through and make fully informed decisions about the business, family spending and future earnings.

Oh and presumably while you were earning 6 figures, you were funding the family while his business was not making any money..

@bedknobs72 you’ve had some good advice about your tax situation.

I think you should resign as a director but still be paid as an employee of the company. I strongly suggest that you look for another job that gives you a regular salary and a pension. It just needs to be less stressful than your previous job. Even working part time would build up your NI contributions and make you less reliant on the business making money.

It's not you that's bled him dry, it's his own ego; he wants to be able to be the big business man with wifey at home, 3 kids, probably fairly big house, etc etc etc. You've talked about going back to work but he doesn't want you to - because it will mean he isn't the big breadwinning man anymore.

This really soundls like your DP does not have his business straight and that he has enough money behind him through family etc that it doesnt matter to him to sort it. It does matter however when he is expecting the same financial backup from you when you have no other source of income.

In terms of the tax, it should be deducted at source from the income. So for every pound that comes out of the company in dividend 7.5p should go into an account separately for tax payment. This should be accounted for in the household funds. you need to understand where the £300 a month is coming from and to understand your own household budget to ensure that the money coming in - after tax is accounted for - covers the money coming out. I think it is clear that currently it is not. The question is what you are going to do about that going forward.

In terms of your original question, The tax bill should come from the household account as that is where the income which generated the liability went to. If you cannot take this from the household account due to lack of funds then you need to discuss where it comes from in terms of getting loan from somewhere to pay it and where the repayments come from.

His comments about bleeding him dry are nasty and I would not continue with the situation based on that. Either you need financial clarity on what is going into and coming out of the joint account - or proabably my preferred option given the circumstances would be to close the joint account and pay half for everything individually with your individual salaries/dividiends being paid to your own accounts. That way you both have control of your own money, know your own tax liabilities and know when you are tight. I would not be comfortable with someone who has 'family money' behind him controlling my finances the way he seems to be.

@bedknobs72 I might have missed it, but roughly what are the figures here? I think you said the salary was £8k ish, how much are the dividends each?

As you are not married I would definitely NOT presume you would be entitled to 50 percent of the house when you split. I would expect IF the children lived with you you would be entitled to child maintenance. Which may not be a lot based on his salary.

She owns half the house

Op I think it’s a bit dodgy that the business is paying out dividends without paying its own taxes - how has the accountant allowed this?

All business taxes should get paid first
Then dividends
Immediately those dividends are received, the tax % should be set aside in a separate account - though you can pay income tax in advance by direct debit which might be an idea. Only then does it go into the household / personal accounts
And £300 is a lot for personal spends though any child related expenses should come out of the household account, even presents etc.

I don't think tenants in common automatically own half each - that would be joint tenants. If your DP put in most of the deposit, supported you earning six figures while you had under school age DC and now pays the mortgage they would have a good argument to claim otherwise. Surprised you don't have separate documentation of who owns what percentage of the property?

No, my mistake, OP said tenants in common 50:50.

@statisticallychallenged - I asked what dividends I received last year ( it's not clear for just looking in the joint as he has put some of his own money in there) and it was just over £20k, he got the same and then around £8k salary.

I've just tried to talk to him about how he should have been organising it - i.e. taking the tax money off before paying into the joint and he said he had been thinking about starting to do that. He also said he knows he should have put money aside for Corporation Tax ( but didn't). He then said that I should have realised that the £300 I was getting in my personal account was Gross and I'd have to use it to pay tax!!!!!!! I also said it was unreasonable for him to expect me to plug the gaps with personal money just because he was. He said I obviously had some savings because I'd bought some nice things for the house recently and I hadn't paid for them out of the joint money. It's true I have some personal savings. I always used to save a little. I grew up believing you should save 10% of everything you earn ( he thinks that's silly) It's only in the past few years that I've not been able to save much ( due to the £300 a month). I don't think I should spend my life savings on plugging the business or losing the last tiny bit of independence I have left ( e.g. being able to make a decision to buy a lamp without asking anyone first)

Things are spiralling out of control with this. I need to calm down a bit!

I was going to flag up re: "Our family house is tenants in common so we own 50/50" (my italics). OP do you mean you are tenants in common and the legal documents state 50/50 ownership? Or are you assuming because you bought the house together you own it 50/50? Because unless you bought as joint tenants you only own whatever percentage the house deeds state you own (which might well be 50%).

Take a deep breath.dont panic and don't react immediately. He is clearly taking you for a ride. He doesn't want you to have an outside job, but complains you are bleeding him dry? If you are a director you need to take part in decision making. If you are a family you need to be clear about who earns and owns what and if it fairly distributed.
Get all the facts and figures, independent advice if you need it. Then tackle him and his selfish behaviour. He's treating you like an idiot because you don't know what's going on.
Are you happy to be living with someone so much richer who wastes money, won't be transparent and is not sharing his assets.

@howabout He did put in a lot more money into the deposit then me, that his Mum gave us. I think his contribution was about 3X my deposit. We talked about signing something to ringfence his deposit but never got round to it. We got the mortgage based on my income as he was freelance then. I wouldn't say he supported me earning a 6 figure salary ( it was only just 6 figs with the bonuses included, I wasn't in banking or anything!) I went back to work 3 days a week and then 4 days. I had a nanny and then used nurseries but I would have to leave at 4.30pm in order to get back home in time to relieve the nanny or collect from nursery. Obviously this didn't look good in the corporate world and didn't allow me to do my job properly. Looking back I don't know why I didn't insist he do more of the pick ups etc as he worked locally. He hired an office to run his freelance work from. But he said he needed all the hours to 'build his business up' and I wanted to support him. I think deep down I wanted him to be a success so that I could get out of the corporate rat race and spend some more time with my babies. In the end my confidence in the corporate world diminished and felt I simply wasn't in the office enough to keep up ( highly competitive environment) It was doomed but I hung on in there until I was literally not sleeping or eating or able to go out, I was so stressed and broken

OK, so he's paying out £40k in dividends. Assuming that the salary tax has been paid properly and he's not paid out more dividends than there is profit then the Corporation Tax bill was around £9400. Plus the tax on dividends which would have been a total of approx £2700 in dividend tax. So you're essentially short by around £1000 per month - reducing your personal spends isn't going to fix it.

@statisticallychallenged thanks for working that out, it's helpful. If his 'next big thing' works out that would actually cover that and more. Remains to be seen. I've given him 2 months .

It's unfortunate timing that this has blown up now. He's about to launch a new venture and me 'complaining' is messing with his mindset apparently ( I am usually encouraging him, giving him ideas etc).

I'm exhausted. He's agreed to pay my excess tax for me ( that wording still annoys me like he's doing me a favour!) and that he 'really will' do something with the business or consider alternatives ( ie a job)

I think I'm going to concentrate on developing my own client base which feeds into the business but if needs be I can separate out into my own business - or I can try and find a job.

Thanks for all the advice!

"Messing with his mindset"...aww diddums

I'd be checking the numbers on his new line, as he may well not have projected all the costs properly. Also, without knowing your industry (and therefore your margins to guess at actual turnover) are you keeping an eye on VAT? Threshold is £85k revenue. You might be well over it already but if it's a service company with low costs then possibly not, and the new stuff might tip you over.

I absolutely don't blame you for stepping away from the corporate culture. I am a SAHM who used to be the higher earner. My set up only works because DH and I have always been completely transparent in our individual and joint finances.

If you want your DP to be open and transparent about the business and how much external support he is receiving from family I think you need to be more transparent with him about your savings and investments. It is odd to be focused on keeping independence when the reality is this is impossible given your level of expenditure relative to earnings / assets and your entanglement in his business.

You do rather sound like you have one foot out the door which may be driving some of your DP's attitude to money atm. Perhaps as pp suggest the wisest course of action would be to get a job so give you back your sense of independence.