Married couple, sole trader small income - effect on home carer / tax credits?

[TriProng]

Hi,

I am in full time employment making 150k a year. Wife took a redundancy 2 yrs ago and is taking care of our 2 daughters. All credits are in my name as she doesn't have any income at present. She is claiming Home Carer's Tax Credit (1600E) which is assigned to me.

She wants to start holding weekly fitness classes. Approximate gross monthly income would be in the range of 750E. Her expense would be probably in the range of 250E for the room she is renting, so net income would be in the range of 500E monthly. She is away for 4-5 months during summer, so annual (net) income would be in the range of 3500-4000E.

We are not sure if she would lose the home carers credit because of this income? Is there any other credit that would be affected because of this? (We are reluctant to start this as income is so small that it might not be worth the time invested if it affects our current tax credits)

Many thanks for reading and helping!

 

[azerty]

My wife did that for a while. Her income was so small that she kept her home carer allowance but her income was taxed at 52 per cent (my rate). When she discovered that, she contacted the revenue. The first person she talked too couldn't believe it but she was right.

 

[bstop]

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[TriProng]

My wife did that for a while. Her income was so small that she kept her home carer allowance but her income was taxed at 52 per cent (my rate). When she discovered that, she contacted the revenue. The first person she talked too couldn't believe it but she was right.

Thanks, thought it will be along those lines

 

[RedOnion]

Thanks, thought it will be along those lines

It's not that bad.
She'll keep the home carer credit.
She'll be taxed at a rate of 40%.
But she also gets an earned income credit, which is the lower of 20% of her income, or 1,775. So at income level you mention, her effective tax rate would be 20%.

On a personal note, I think you should look beyond the tax and net income side of this. There can be huge benefits to getting back into work after a gap.

 

[azerty]

My apologies for my mistake. My wife did that before 2016 so no earned income tax credit at that point.