Any small business tax accountants on here please?

[BorgQueen]

I have a simple question I can’t find an answer for anywhere.
DH pays me £120 weekly for admin/book keeping on his sole trader business, for this I know he doesn’t have to register as an employer and run payroll as it’s below the LeL. These payments go directly to me so all legit (but obviously are used on household bills) - it just saves a bit of Tax/NI for DH.

My question is : if I took a small income from my Sipp of say £200 a month, would he then have to register? (I’m paying in the maximum allowed to my Sipp £2880 net).

I would still be well under my PA of £11300 ( he gets my marriage allowance) so no tax due and you don’t pay NI on pension income.

I used my full allowance last tax year by drawing from my Sipp, but he didn’t start paying me until this April, he only started self employment last December. I’ve drawn nothing since.

All I can see online is that registering as employer is necessary if the person you pay has a 2nd income or occupational pension, no mention of a personal pension in variable drawdown.
It would be bonkers if he actually had to register in this situation as there would be no tax, employee OR employer’s NI due.
HMRC won’t even know he pays me unless they decide to ask, My wage is an expense that gets lumped together with everything else on the self assessment page.

If you are under the state pension age it would make sense for him to set up a PAYE scheme and pay you (slightly more) through that anyway as your then get to your NI credits - there still wouldn't be anything payable by anyone and you could use HMRC basic tools so wouldn't need to pay a third party to run the payroll.

I don't know on the drawdown question.

I’m getting the required 5 years credits my my DD, I get specified adult credits for providing childcare for DGS

I can’t even get an answer on the hmrc forum, somebody must know!

I could take a tax free lump sum I suppose but I’d rather use ad hoc UFPLS to keep more cash within the Sipp

HMRC guidance on having employees refers to the employee having another job or a pension.
www.gov.uk/paye-for-employers#:~:text=As%20an%20employer%2C%20you%20normally,and%20National%20Insurance%20from%20employment.

The reasoning behind it will be that if you have only 1 PAYE income stream which is below the LEL then HMRC don't need to "marry up" records. If you have another income stream they need to know about them both so they can determine whether PAYE needs to be applied.
You know in your case that it won't, but thats not really the point.

Presumably your drawdown are 25% tax free and 75% taxed - albeit no tax is payable on the 75% as its below the PA.

If nothing was done though, there is no way of them knowing that it’s ME that he pays, or anyone else really, unless they ask.

What he pays me comes under ‘expenses’ on the self employment short form, staff costs aren’t itemised, well only in the freeagent software I use for the business. Which I don’t have to use to submit SA, I can do it direct.
If I have to run bloody payroll for a a non event I’ll not be pleased.

If income from your DH's business was your only income at the time he started paying you, then you are correct that he would not need to register as an employer.
If you receive income from another source after that, then that business/provider would need to asses you for tax/NI, and as you would state you already received income from elsewhere, they should tax you at 20%. You could then contact HMRC to advise of your total expected income for the year, and ask them to amend your tax code with the 2nd 'employer' so that they don't deduct tax.
If you've already been receiving income from the pension without deductions, then they'll probably have you on their payroll with a 1257L tax code (check your P60 issued in April 2023) and will continue processing your payments without deducting tax.
It's a bit of an unusual one with receiving income from SIPP in previous years, but not this current year before receiving payment from your DH's business.

Sounds like a complete PITA, especially with HMRC helpline currently out of action.
It’s only a thought at the moment, to get some cash out tax free, (say £2k x 5 years) and into an ISA as I won’t have much leeway, if any at all, if they don’t increase the PA, once State pension kicks in in 8 years. I don’t want to take a tfls of £10k now, I’d have to sell funds and I’d rather drip feed it out with natural yields.

I only took income last year because DH had nearly a year off to train and go self employed and I used up an old, small pension that I transferred into my Sipp, it was never a long term plan to take income.
I have an 1130L tax code from my Sipp provider (marriage allowance).

It had been my plan for DH to pay me more from 2026, so he could have then registered but if it has to be done if/when I take income , then so be it.

Using Basic Tools really isn't much of a PITA, and as I mentioned above you could increase the amount you are taking (tax & NI free), thereby reducing the overall tax take from the business.

Would he have to ‘prove’ the amount of work he pays me for if he increased my ‘wages’ to just over the LEL?

In reality it’s an hour a day, so technically he’s paying me about £16 an hour, matching receipts for materials etc. to his bank feed / freeagent software plus creating his customer invoices. Although running payroll would increase my ‘workload’ .

I suppose one positive about being properly employed would be the ability to pay more into my Sipp, I could probably double the £2880 I currently pay, given that the MPAA has increased to £10k now.

Why don’t you register as self-employed and just do a Self-Assessment for yourself?

You surely know the Self-Assessment forms ask about private pension income.

and depending on the size of your pension pot you shoule try to make use of your personal allowance every year (if you earn 6k, then take 6k out of the pension) to reduce tax once you get your state pension.

Because it’s not classed as self employment if only DH is paying me ?

One last query :
If I up my pay to £7000 and become ‘employed’ under paye
would I be able to increase my Sipp payments to £5200 ( from £2880)?
That would definitely swing my towards running payroll!

Yes you should be able to do that.

The other thing to consider is the employer making employer pension contributions for you. They would be a cost of employment and therefore allowable as a business expense. The contributions go into your scheme gross and no tax uplift for you, but tax relief at whatever the marginal rate is for the business.

That’s going to take a bit too much out of the business, maybe in the future.
My thinking behind increasing my Sipp contributions is to make our pensions a bit more equal, as it stands DH’s is 6x the size of mine AND he gets a £7k+ military pension in 2025, which he’s going to feed into his Sipp.

If I can get an extra £30k inside my Sipp that will be grand.
Off to look into getting him registered as an employer and setting up PAYE 😏
Thanks Squirrels.

https://www.gov.uk/register-employer#:~:text=You%20must%20register%20even%20if,before%20you%20start%20paying%20people.

https://www.gov.uk/basic-paye-tools