Changing PAYE pay (Limited Company) and adding employee

[Legalornot]

Hello all, i have nc to not be 'outed'.

My dh is a director of a limited company, he is also the only employee.
He currently earns roughly £1400 a month under PAYE.
I currently do his accounts (supplier invoices, chase debts, VAT returns, etc etc)
We are hoping to add me as an employee. The business is doing ok, but adding me is obviously going to mean the business needs to earn more.

My query is are we legally allowed to change my dh's wages. As in lower them, to be able to allow me to earn a wage too? Also can we lower it so that we don't pay PAYE/NIC just until the business is actually making a decent profit? Or is this illegal?
Is there anything else we need to look at?

Thank you for reading :)

Perfectly legal and normal. You do of course have the consent of the employee!

Are you also a shareholder? It is perfectly permissable to pay a wage below the PAYE/NIC level and take any extra money as dividends - it would be a good idea to have a chat with an accountant.

mmmm - you should be taking your tax free allowances as wages (about £668 per person at the moment) and the remainder as dividends as it is much more tax efficient way of doing things.

Absolutely legal BTW.

sorry xpost caroldecker!

Thank you.

I actually dont know if he has 'shares' in the company. Would he automatically have them? I dont have any.

Also we are with an accountant , I have taken over all of the day to day stuff, as dh was paying them £600 per month to do everything (!!)
Obviously i can't do the company's house and corporation tax stuff. As the company is struggling shouldn't the accountant have mentioned any of your suggestions?
Thank you again :)

If the company is struggling, there may not be much money to save. He should have mentioned it. Is (s)he a qualified accountant or a book-keeper?
As for the shares, someone has to own the company and I assumed is was your DH - if you want to PM me, I can provide more advice/background on companies and tax position.

Your situation can be quite complicated - IR35, NMW regulations, changes to ACT (which changes the salary v. dividend calculation), etc - so a good accountant to help you through this would be an idea.
Don't write off all accountants because you had a bad one. Find a different, better one.

Dh gets a salary of 1000 per month, it could be lower but I prefer this as he's paying a small amount of tax and ni and may keep hmrc happy..(or happier at least maybe!) the rest he takes in dividends.
I do all the accounts, vat and sort dividends etc and only use an accountant to do the paye payroll which costs 20 per month, and year end stuff which is about 500.
Your dh can take whatever salary he likes and if he takes on an employee (you) he can pay you a salary to use your own allowance.

Just noticed you said the company is struggling, does it make any profit?

We did this with DPs business - I was 'paid' my tax allowance.
I would say it would be good to pay at least him just enough to pay (or at least reach lower earning threshold or whatever it is called ) NI - for pensions etc - especially as you wouldn't need to pay the first £2k of employers NI.

No, currently it doesnt make a profit, so i think dividends are out right?
Yes the accountant is from a big company so is definitely qualified.
Am i right in thinking if we both took £800 seperately we would still be liable to pay something to HMRC?

I would go for a smaller firm of accountants, I currently am charged £850 per year for all the payroll (10 employees) companies house and tax returns. I think my turnover is higher than yours.

If you don't work at anything else you and Dh should hold 50% of the shares each and pay yourselves £668 each per month. There is NO NEED to "keep the revenue happy" !!! They get tax from the dividends which works out as less than if you paid yourselves a salary, this is a benefit to you to encourage entrepreneurship.