Single Income Family & Wifes new business

[NowTime]

Hi All

I am the sole income for our family and my wife is the home carer looking after the household and our children.

She has set up a small part time business this year which probably has taken in about €1,500 in services this year. Given some costs that were involved I think there may be a small profit on this.

I am looking for advice on
1) The Tax Credit implications, currently we get the standard tax credit of €44,400. How will this be affected by the introduction of a second income and her becoming a sole trader? I presume we just stay jointly assessed? Do we split to become separately assessed?
2)Do we lose the Home Carers Tax Credit of 900?
3)Are their any other implications of becoming a sole trader versus just registering for tax or are they one in the same?
4)I submit an annual tax return to the revenue, does this now need to pass to an accountant or can she keep her assessment separate?

Thanks in advance

 

[Mini3277]

Hi All

I am the sole income for our family and my wife is the home carer looking after the household and our children.

She has set up a small part time business this year which probably has taken in about €1,500 in services this year. Given some costs that were involved I think there may be a small profit on this.

I am looking for advice on
1) The Tax Credit implications, currently we get the standard tax credit of €44,400. How will this be affected by the introduction of a second income and her becoming a sole trader? I presume we just stay jointly assessed? Do we split to become separately assessed?
2)Do we lose the Home Carers Tax Credit of 900?
3)Are their any other implications of becoming a sole trader versus just registering for tax or are they one in the same?
4)I submit an annual tax return to the revenue, does this now need to pass to an accountant or can she keep her assessment separate?

Thanks in advance

Firstly your wife is now a self-assessed individual, meaning that she is obliged to file a tax return (Form 11) on or by the 31st October every year. There is a two week concession for filling and paying online.

I'll attempt to answer question 1 and 2 together as they go hand in hand. You (plural!) will either receive the increased Standard Rate Cut Off Point or the home carers credits depending on which is more beneficial to you. It would appear that the Home Carers Credit is more beneficial for you based on the figures you provided. In such a case you will receive the €44,400 tax band plus the €900 Home carers credit and you wife's profit will be taxable at the marginal rate of income tax (41%).

You can elect for separate assessment meaning that yourself and also your wife will be both be assessable individuals (Assuming you are self assessed currently). By doing this you will be able to keep you Income Tax Return separate from your wife's return. You will still receive the benefits of Joint Assessment.

Other things you'll need to look out for are: -

Does your wife need to registered for VAT?

Assuming your wife provides services as opposed to goods then she will be required to registered for VAT purposes if her turnover in a consecutive 12 month period is in excess of €37,500.

If your wife has a tax liability then she will need to pay preliminary tax on account for 2008.

Make sure your wife has a separate bank account for the sole trade.

 

[NowTime]

Thanks for your reply.

We are currently jointly assessed.

Does your wife need to registered for VAT?
Assuming your wife provides services as opposed to goods then she will be required to registered for VAT purposes if her turnover in a consecutive 12 month period is in excess of €37,500..

Do you mean that she does not need to register for VAT unless it's past €37,500? The business will grow but it's not expected to get to that level in the next couple of years.

Make sure your wife has a separate bank account for the sole trade.

Not so far, but thanks for the advice!