What to do?? PAYE - Register as Sole Trader or Ltd??

davegilly

Hi

I put this in the accountancy forum also but that seems to be more about education so maybe I will get better advice here??

I have started a small business that is starting to make some money. I haven't registered it yet as it was more of a hobby until recently but I will now be registering for tax however I am unsure of the best course of action for this.

My current situation is that I am a PAYE worker also and earn approx €45K plus have a company car/phone/Medical etc and pay all the associated BIK on that. My new business venture has the potential to earn me an additional €20K this year (that's what I have projected for this year with the current info available to me, it may be more but not much) and in all liklehood it will probably stay as a part time business for the forseeable future.

My wife is currently on maternity leave (she receives only the government maternity benefit as her company don't pay anything) and receives approx €281 per week (I think!) She is due to go back to work at the end of March but more than likely will extend her leave until August unpaid. Her salary is €48K. I am not currently claiming any of her tax free allowance as she claims back all the tax owed at the end of March and uses this towards living expenses while on unpaid leave.

Now ideally my wife would prefer not to go back to work at all in August and stay at home and mind the children (we have 2) so what is the best way for me to operate everything financially?? If she stays at home then obviously I would get her tax credits, about how much would this add to my take home PAYE salary??

If I register as a sole trader for the business (I am essentially providing a service rather than a product) what are the implications on tax for me and my wife.

Would I be better off registering as a company and "hiring" my wife to do the asmin side of things and paying her a salary thus reducing the tsx liaability??

Does anything affect my current PAYE job as I really don't want them to know anything about my sideline business.

I know I need to go see an accountant but I wouold love to get some ball park info first so I know where I stand with everything.

Thanks very much for your help

srsly78

Ball park info: accountant should cost you less than a grand for the year. This would cover annual return + advice like you are seeking.

nipper banks

Its certainly best to register as a limited company and hire your wife. It the most tax efficient way, but there is a certain amount of red tape, so you will need a small amount of accountancy advice.

Bren157

With both of you employed already a ltd company is best. Otherwise you pay tax on all self-employed profits. With a ltd company you can take minimal salary, directors expenses and fund a pension much better than via self-employed. Suggest you get a small accountancy practice - they take much better care of you than big players. Good luck with the business.

professore

davegilly wrote: »

If she stays at home then obviously I would get her tax credits

Incorrect, you don't get any thanks to Charlie Mc Creevy you are only entitled to a single person's tax credits, and she gets some token "stay at home partner" allowance. Best bet is to employ her in the business, and pay her a salary, but be sure that she is actually doing something concrete and provable for the work so Revenue won't see it as a tax dodge.

Bren157

Easiest way to do this is to employ your wife, have a job title and list of duties; set up her email address etc to show her involvement. Then pay her as much as you can to maximise tax credits. Thereafter avail of director expenses and if there are still funds left over, finance a director pension for both of you.

thecommander

Bren157 wrote: »

With both of you employed already a ltd company is best. Otherwise you pay tax on all self-employed profits. With a ltd company you can take minimal salary, directors expenses and fund a pension much better than via self-employed. Suggest you get a small accountancy practice - they take much better care of you than big players. Good luck with the business.

You can't pay yourself 1k a year and then dump 20k into a pension. There's a % limit based on your salary. Check with accountant about that one.

Bren157

Director pension is determined by combination of salary and yrs of service. A professional advisor is needed to determine the figures but it is one of the compelling reasons to go as a ltd company.

You can't pay yourself 1k a year and then dump 20k into a pension. There's a % limit based on your salary. Check with accountant about that one.[/Quote]

Bren157

Director pension is determined by combination of salary and yrs of service. A professional advisor is needed to determine the figures but it is one of the compelling reasons to go as a ltd company.

You can't pay yourself 1k a year and then dump 20k into a pension. There's a % limit based on your salary. Check with accountant about that one.[/Quote]