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Nick

NI requirement

If I wish to pay someone to work for me, because it will save me paying tax, what are the things to consider? Clearly, he'd have to pay tax at the appropriate rate, but does he or I have any NI contributions to consider. He'd be paid around £6,000 a year, and this would be his sole income.
Rob R

Is he to be employed or self-employed? I presume employed, as it's his sole income, in which case he'll be getting less than the £153/week threshold for NI. However, he may wish to pay voluntary contributions to maintain his entitlement to benefits including state pension. If he's over state pension age, he doesn't need to pay any NI contributions.
Nick

It's my son. He's still at school. I have an income from a property, and pay 40% tax on the 'profit' from it, and the remainder goes to pay bills. I do some work on the property, and son helps, for which he doesn't get paid (roof over his head, access to my beer fridge, etc, etc).

If I paid him, I'd keep the 40%, and he could pay the bills.

Am I missing anything?
Mistress Rose

He would have full rights like minimum wage, paid holiday, sickness pay, and from 2017 you would have to set up a pension scheme for him, sooner if you employ more than just a few people.
Rob R

It's my son. He's still at school. I have an income from a property, and pay 40% tax on the 'profit' from it, and the remainder goes to pay bills. I do some work on the property, and son helps, for which he doesn't get paid (roof over his head, access to my beer fridge, etc, etc).

If I paid him, I'd keep the 40%, and he could pay the bills.

Am I missing anything?


Interviews? There might be a better candidate out there... (sounds like a good job to me). Plus all the stuff Mistress Rose said, of course.
Nick

The last thing a 17 year old living at home in full time education needs is sick pay and holiday pay!
Chez

Can you talk to your accountant about it? Ours is really helpful about that sort of thing.
onemanband

That's some beer fridge if it equates to £6k a year Laughing

£6k(just labour?)per year sounds a lot to maintain one property. Or does job cover other things ?

Even if son only works for you I can't see why it couldn't be done on a self-employed basis if each job is done on a price.
Treacodactyl

It's sounding a bit like tax avoidance to me. Wink

Is there any possibility to transfer ownership of part of the property to son so he'd get some of the rental income? That might help later for IHT purposes but would need good legal advice.
tahir

Is there any possibility to transfer ownership of part of the property to son so he'd get some of the rental income? That might help later for IHT purposes but would need good legal advice.


Prolly a good idea
Rob R

You can transfer up to £30k in any one year before Capital Gains kicks in (providing you live for a further 7 years after the transfer). Nick

Well. It is tax avoidance. I've already lost 40% of the cash before we bought the place and they want a further 40%. My priorities are to ensure financial security for my kids. I don't make much of an apology for that.

As for transferring it to him, he's only 17 so not yet.

It more than a beer fridge. It's a room with bathroom in a house with full access to every other room, the freezer, all meals, bills, clothes and taxis thrown in. Also, we supply a holiday or two every year and complete laundry services.

You don't have kids, do you? Wink
Nick

We don't have an accountant. My life is very simple. Mostly I'm paye plus rental income an the tax return is simple. Just wondered if I'm missing a trick and it appears I am.

We did have an accountant once. He charged £500 to fill in the form for me but I had to provide all the figures. He offered no advice. More of a robbing bastard, than an accountant, tbh. Smile
Nicky Colour it green

as i understand it, the pay will be less that the NI thresholds for both employers and employees NI - but you would still need to issue payslips and do the PAYE system, including a year end submission etc. All relatively easily - I think I would start by contacting linland revenue and asking how to proceed. I do wonder if you would be obliged to have employers liability insurance or the like....(dunno how the law stands on this)

Alternatively son could invoice you for his time - he would be self employed, and could fill in a form to not pay NI due to low income,and would have to submit tax return but wouldn't pay any tax due to being below tax allowance. If he only has the one customer (you) IR might not accept this..
again i would phone inland revenue and talk it over.
john of wessex

My brother employs his wife in his business.

Its the sort of arrangement that HMRC look at very hard

So I'd say be very careful

You could transfer the property to a trust so your son can have the income but not access to the capital.

I would be inclined to make it a discretionary trust in case he needs to claim a means tested benefit
RichardW

How will doing this affect his finances & possible educational costs? Nick

How will doing this affect his finances & possible educational costs?

He currently has no finances really. And I pay his school fees.

What sort of thing do you mean?
Nick

My brother employs his wife in his business.

Its the sort of arrangement that HMRC look at very hard

So I'd say be very careful

You could transfer the property to a trust so your son can have the income but not access to the capital.

I would be inclined to make it a discretionary trust in case he needs to claim a means tested benefit

They can look, but, tbh we are talking about less than five grand a year. If all he did was cut the grass and cleaned between tenants he would be under paid.
Chez

We don't have an accountant. My life is very simple. Mostly I'm paye plus rental income an the tax return is simple. Just wondered if I'm missing a trick and it appears I am.

We did have an accountant once. He charged £500 to fill in the form for me but I had to provide all the figures. He offered no advice. More of a robbing bastard, than an accountant, tbh. Smile

I will PM you. If you have a good accountant, he should cover his own costs.
vegplot

As a student he won't need to pay tax (under the PA of £10k and looks like he won't need to pay NI (£153 a week per week).

As an employer you may need to pay NI but there's a current exemption up to the first £2k so you should be clear of that was well.

I've forgotten the original question so hope this helps.
Cathryn

If Chez et al haven't answered your question I will ask Jack as he has employed his son and my daughter on the farm at times. Rob R

If ever you have another similar vacancy I'm happy to undercut. I also have no school fees & pay my own NI... Nick

You can't undercut, unless the money I pay you then goes to pay his school fees, insure his car or replace my beer. Rob R

Is it a zero-hours contract, too? Nick

Well, yes, but as I'm the worlds greatest employer, I pay the five grand, even if you do zero hours. Rob R

I'll have to think about it. john of wessex

Can I apply for the job then............... Nick

Are you sure? The pay is only notional and you'd have to put up with an untidy bedroom populated by an Inbetweener. john of wessex

Um................

I suggest that HMRC may not look kindly
Pilsbury

Doesnt really matter if they dont look kindly so long as its within the rules and law.... onemanband

So presently son gets roof over head, laundry, food, beer, utilities and taxis. You're going to pay him to do nothing. Then charge him rent ?
Presumably only £4250 rent so that it comes within the rent-a-room tax relief ?
This is beginning to sound like an episode of Bread.
Rob R


This is beginning to sound like an episode of Bread.

Laughing
Nick

So presently son gets roof over head, laundry, food, beer, utilities and taxis. You're going to pay him to do nothing. Then charge him rent ?
Presumably only £4250 rent so that it comes within the rent-a-room tax relief ?
This is beginning to sound like an episode of Bread.

Hey, that's the system. What can I do?
Nick

Um................

I suggest that HMRC may not look kindly

Genuinely, they can look unkindly, but can they do anything?

I have the income, the jobs he will do may be minor and infrequent, but I can pay whatever I want, to whoever I want, presumably, and as long as he pays any tax or NI that is required then is there anything wrong?
crofter

Um................

I suggest that HMRC may not look kindly

Genuinely, they can look unkindly, but can they do anything?

I have the income, the jobs he will do may be minor and infrequent, but I can pay whatever I want, to whoever I want, presumably, and as long as he pays any tax or NI that is required then is there anything wrong?

As long as he really does some work, you should be OK. He can earn almost 10K before having to pay any tax, you will have to pay NI if he earns over 150/week, and you have to actually pay him!
Mistress Rose

Another point is that if he is an employee you may well have to have employees insurance for him. You will have to keep the paperwork for that for something like 20 years as it covers long term problems as well as falling off a ladder.

There may well be some sort of insurance for this sort of thing as there must be something for people that for instance employ a carer themselves. Sorry not to be of more help, but our business is a limited company and the rules are different.
Behemoth

Are you sure? The pay is only notional and you'd have to put up with an untidy bedroom populated by an Inbetweener.

There will have to be a money-go-round. I suspect somewhere there is a paragraph that will be your downfall.
Nick

I can happily pay him. That bits easy. Just means he will pay his school fees or car insurance himself. We have plenty of son based bills he can own. onemanband

If the work is infrequent, that sounds more like self-employment.
Far simpler on the paperwork side. All you will have to do is sign a cheque. All he has to do is write a quote/estimate and invoice/receipt.
Once he is registered self-employed he can legally do any work which would otherwise be classed as cash-in-hand(as long as he declares it). For low income, tax return is simple - basically just total income and total expenses to enter in tax return.
Shan

Are you sure? The pay is only notional and you'd have to put up with an untidy bedroom populated by an Inbetweener.

There will have to be a money-go-round. I suspect somewhere there is a paragraph that will be your downfall.

If work is being done and paid for, why would there be a downfall?
Shan

https://www.gov.uk/national-insurance/overview

You pay National Insurance contributions to qualify for certain benefits including the State Pension.

You pay National Insurance if youíre:

16 or over
an employee earning above £153 a week
self employed and making a profit over £5,885 a year (unless you get an exception)
The exact amount you pay depends on:

how much you earn
whether youíre employed or self-employed
You may also want to pay voluntary contributions to make up for gaps in your National Insurance record. For example, you can have a gap when you werenít working and didnít get any state benefits.

So, keep it below the level and he doesn't contribute NI or income tax. So no PAYE problems other than you will probably have to declare that he is below the threshold, although, I rather suspect this would be sorted out through his tax code.
Shan

If the work is infrequent, that sounds more like self-employment.
Far simpler on the paperwork side. All you will have to do is sign a cheque. All he has to do is write a quote/estimate and invoice/receipt.
Once he is registered self-employed he can legally do any work which would otherwise be classed as cash-in-hand(as long as he declares it). For low income, tax return is simple - basically just total income and total expenses to enter in tax return.

If he only has one customer he is unlikely to be viewed as self-employed.
Rob R

Are you sure? The pay is only notional and you'd have to put up with an untidy bedroom populated by an Inbetweener.

There will have to be a money-go-round. I suspect somewhere there is a paragraph that will be your downfall.

If work is being done and paid for, why would there be a downfall?

The tax dodging vigilante's might get him. Or at least post a meme about it on facebook.
Shan

That's their problem if they are too stupid to manage their taxation efficiently. onemanband


If he only has one customer he is unlikely to be viewed as self-employed.

Yes that's true, but if he is starting out then he's not going to have lots of customers, nor need them if in education and living at home with no dependants.
I worked for several years self-employed for just one person. My colleagues worked elsewhere aswell, but I had a house full of lodgers and had no need to seek other work. I did meet other self-employed criteria tho.
I can't see how you can employ somebody(paying them weekly?) to maintain one house when the work is infrequent and unknown. If nothing breaks or tenants don't move then £5 or £6k is a lot for a bit of gardening.
It is debatable though and I'm not saying I'm right.
relevant link
and another (I think)
Shan

It's no different to having someone on retainer.

We are not trying to split a nut here with an anvil here.
RichardW

£6k a year is only about 5 hours per week at the rates most gardeners charge.

I have had loads of jobs / contracts were they paid me incase they needed me. Most never did but were still happy to pay.

Just like insurance.
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