My husbend is self employed, we have one employee. I have been working for my husband for the last few months, doing the books etc. I have not been paid. What is the best way to go about geting myself paid out of the company? It wouldnt be much, maybe the equvalant of a part time wage. Do I put myself directly on the payroll, should I set myself up as contractor and invoice the company? I thought I read somewhere that its a different set up from a normal part time job as I am working for my spouse, is that right? Anyone any idea to point me in the right direction? Many thanks.
Working for my husband's business and getting paid?
- Thread starter bonza1
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You will be an employee of the company and not your husband. Both you and your husband can be emlooyees of the company and are entitled to the standard tax deductions. From a tax perspective setting yourself up as self employed and invoicing the company may be more difficult. You should however get advice from a professional accountant on this.
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OP states that there husband is self employed - Would a partnership work? would qualify her for Class S contributions which would contribute to MB and contributory pension
She would not have to be taken on as a partner, she can be employed by the husband like any other employee but pays PRSI at class S regardless of wether it is a limited co or self-employed trader.
Class S PRSI contributes to MB and pension.
Brendan44 has amended his post to remove reference to PAYE credit (confusion sorted)
Class S PRSI contributes to MB and pension.
Brendan44 has amended his post to remove reference to PAYE credit (confusion sorted)
Isnt a sole trader paying their wife regarded as class m?
Long time since I looked at PRSI so could be mistaken
From Citizensinformatiion.ie
Employing family members and PRSI
Most employees are liable to pay PRSI. Exceptions to this general rule apply in the case of certain family employment. This term is used to describe a situation in which a self-employed sole trader either employs, or is assisted in the running of the business by a spouse, civil partner or other family member(s). If the business does not operate on a sole trader basis - for example if it is a Limited Company or a Partnership - it is not family employment.
The following categories of family employment are insurable under the social insurance system in exactly the same way as employments that have no family connection:
If you are employed as an employee by a prescribed relative and the employment is not related to a private dwelling house or a farm in or on which both you and the employer reside (PRSI Class A or Class J applies). If you are employed as an Apprentice by a prescribed relative (even if the apprenticeship employment does relate to a private dwelling house or a farm in or on which both you and the employer resides) there must be a registered Contract of Apprenticeship involved (PRSI Class A or Class J applies).
A prescribed relative is a parent, grandparent, stepparent, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother, or half-sister.
The following categories of family employment are the exceptions that are not covered by the social insurance system:
PRSI Class M is used to record situations in which there is no liability to social insurance
Long time since I looked at PRSI so could be mistaken
From Citizensinformatiion.ie
Employing family members and PRSI
Most employees are liable to pay PRSI. Exceptions to this general rule apply in the case of certain family employment. This term is used to describe a situation in which a self-employed sole trader either employs, or is assisted in the running of the business by a spouse, civil partner or other family member(s). If the business does not operate on a sole trader basis - for example if it is a Limited Company or a Partnership - it is not family employment.
The following categories of family employment are insurable under the social insurance system in exactly the same way as employments that have no family connection:
If you are employed as an employee by a prescribed relative and the employment is not related to a private dwelling house or a farm in or on which both you and the employer reside (PRSI Class A or Class J applies). If you are employed as an Apprentice by a prescribed relative (even if the apprenticeship employment does relate to a private dwelling house or a farm in or on which both you and the employer resides) there must be a registered Contract of Apprenticeship involved (PRSI Class A or Class J applies).
A prescribed relative is a parent, grandparent, stepparent, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother, or half-sister.
The following categories of family employment are the exceptions that are not covered by the social insurance system:
- If you are employed as an employee by your spouse or civil partner
- If you are employed as an employee by a prescribed relative and the family employment relates to a private dwelling house or a farm in or on which both you and the employer reside
- If you assist or participate in the running of the family business but not as an employee. (For example, a son/daughter who is attending full-time education who participates in the business (e.g. farm) after school hours or a spouse/civil partner who carries out book-keeping work for the business - but is not an employee)
PRSI Class M is used to record situations in which there is no liability to social insurance
I can't figure out if the OP's husband has a company or is a sole-trader.
Generally speaking, you cannot pay a PAYE salary to someone for doing nothing. Neither can you pay a large salary to someone who does very little*, especially if that someone is your spouse. My accountant was very clear on that (ok, I suppose you COULD, but Revenue would come down on you like a ton of bricks in the event of an audit).
As the OP is doing the accounts, then she is entitled I suppose an average salary for the hours worked for a bookkeeper.
However, assuming that her husband isn't using up all the allowable tax credits, it's better to set up a limited company and pay both spouses a directors salary - as far as I understand, you can pay a director as much as you want. That's what several accountants recommended to me. That way you maximise the amount of salary for the least amount of tax. You can also exploit other benefits (small awards scheme, bike to work scheme, renting part of your own home for home-office, etc. etc.).
I don't know about partnerships.
*Obviously we all know people who get paid large amounts for doing very little - they're called 'managers'... but they don't work for their spouse!
Generally speaking, you cannot pay a PAYE salary to someone for doing nothing. Neither can you pay a large salary to someone who does very little*, especially if that someone is your spouse. My accountant was very clear on that (ok, I suppose you COULD, but Revenue would come down on you like a ton of bricks in the event of an audit).
As the OP is doing the accounts, then she is entitled I suppose an average salary for the hours worked for a bookkeeper.
However, assuming that her husband isn't using up all the allowable tax credits, it's better to set up a limited company and pay both spouses a directors salary - as far as I understand, you can pay a director as much as you want. That's what several accountants recommended to me. That way you maximise the amount of salary for the least amount of tax. You can also exploit other benefits (small awards scheme, bike to work scheme, renting part of your own home for home-office, etc. etc.).
I don't know about partnerships.
*Obviously we all know people who get paid large amounts for doing very little - they're called 'managers'... but they don't work for their spouse!
Hi, Husand is a sole trader. I am working, not doing nothing, so would like to get to a point where I could take a small wage. Im happy not to for as long as needed, but at the same time, would like to think I can take a wage at some point soon. I think maybe I need to do some more research on this. Thank you for all the replies, they have been very helpful and have given me a few places to start.
mandelbrot
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While what Sean C has said is all relevant and correct, if you're talking about a situation where you and hubbie want to pay you a modest wage out of the business i.e. 10k, under operation of the PAYE system, then there's no way a Revenue auditor is going to question it. I mean, they would have to (somehow) prove that you hadn't performed any work to earn your wages and they'd be getting into very grey areas, and for very little additional tax liability...
If as you say, the goal is to merely be able to draw a part-time wage from the business (which should also be tax efficient), then it wouldn't necessarily merit incorporating the business, unless this is attractive for other reasons as well.
So the simplest thing to do is to register you as an employee of your husband (you won't be entitled to a PAYE tax credit), and pay yourself IN A VISIBLE WAY (e.g. by cheque) and record it properly through the PAYE system - this is what the tax inspector would be looking to see, correct operation of PAYE.
One other thing to consider is that depending on how much wage you draw, it may affect your entitlement to home carer's tax credit if you have dependent kids...
If as you say, the goal is to merely be able to draw a part-time wage from the business (which should also be tax efficient), then it wouldn't necessarily merit incorporating the business, unless this is attractive for other reasons as well.
So the simplest thing to do is to register you as an employee of your husband (you won't be entitled to a PAYE tax credit), and pay yourself IN A VISIBLE WAY (e.g. by cheque) and record it properly through the PAYE system - this is what the tax inspector would be looking to see, correct operation of PAYE.
One other thing to consider is that depending on how much wage you draw, it may affect your entitlement to home carer's tax credit if you have dependent kids...
T McGibney
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I hate to say this but, sorry, this is terrible advice, in pretty much every respect.
T McGibney
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But is there any point in doing this? The tax saving will be minimal unless perhaps the husband is paying top-rate tax. (The OP has given no indication that this is the case.) On the other hand, errors in the operation of PAYE, filing incomplete or late returns etc, may actually cost them money.
mandelbrot
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Granted, the amount of tax saving is entirely dependent on the level of taxable profits, but the OP has said that she wants to draw a wage, so I'm only advising on the basis that she will be paid.
Thinking about it though, it might also save a few quid in USC and PRSI (difference between Class S on hubbie vs. Class M on wifie...).
He has one employee already so the risk of late returns is already there.
T McGibney
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Thanks for pointing this out. If the OP is already familiar with PAYE procedures, the risk of things going haywire is obviously lessened.
How so?
mandelbrot
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How so, as follows:
While what you've said about paying big salaries for nothing is quite true in the technical sense, practical application is everything: in a husband / wife scenario this would be the greyest of grey areas; exactly how much work was done, when and how, are totally up in the air, and extremely difficult to pin down.
To the extent that a guy who otherwise makes a taxable profit of €50k, pays a PAYE wage to his wife of €20k in a year (reducing his own taxable income to €30k), there's not a tax inspector in the country who's going to challenge it, particularly if she has no other employment etc to suggest she wouldn't have been available to work for the husband.
I don't know what accountants you've been talking to, but personally I have never encountered a problem where a wife has been put through a payroll for a wage, and PAYE correctly operated on it - this point is relevant, its not enough to pretend a wage was paid, it should actually be visibly paid by cheque / transfer, or the Inspector may decide to call shenanigans on the fiction (but this is a different issue altogether).
You go on to say that that her husband isn't using up all the allowable tax credits, it's better to set up a limited company and pay both spouses a directors salary. This makes no sense at all, since if he isn't even earning enough to use up all the available credits / standard rate band, then there's no tax to be saved by incorporating a Ltd company.
Likewise if the business is only generating a subsistence income for the trader, there is no way a Ltd co is the way to go - incorporating is generally only ever recommended where a person's business is generating substantially more cash than they actually need to draw, and as a result they are being taxed at the high income tax rate on money that they don't want / need to extract. (Or a situation where there is sufficient financial risk involved in the business that the person feels the need to have limited liability).
The administrative and compliance burdens are greatly increased when operating a limited company, reporting to both CRO & Revenue (for both the company and the directors), which increases the cost base of the business.
So that's why it wasn't great advice - factually correct, granted, but as advice for the specific situation, not great.