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hello-theprintsm
April 29, 2024
Solved

Tax for wife - now joined my business

  • April 29, 2024
  • 1 reply
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Hi there
I have recently added my wife to the business as I am expanding and need help with book keeping etc. She's only working a few hours a week which is great. She has another full time job, earning £30k per year and pays NI and tax at the usual rate. 

I have added all this info into QBO, within her payroll profile. But when I run payroll, and look at a draft payslip - there is NO NI contributions showing, and the tax rate is 50%. 

Her salary is £6k per year so £500 per month. Her gross shows £500 but here net is £250 - no NI showing and a reduction of half. This cannot be right. I have asked my accountant who is not able to assist - she suggested I reach out to QBO.

Can you please help?

Thank you

ChrisP

Best answer by GeorgiaC

Thank you.

 

to confirm, my wife has another job and is paid regularly. 

I selected 'C- has another job or pension' in the tax info part of her payroll profile in QBO and then, in the pay history, selected that other employers have paid her since 6 April 2024 and entered the salary and tax details.

 

But I have just been informed by an accountant that I should not enter any historical salary details in the pay history section. This seems wrong but I was told it is correct - HMRC will create a BR tax code and adjust next month. 

 

I did this and ran a draft payroll again and as I expected, no tax was deducted at all.

Finding this all very baffling - hope you can clarify what is the correct route.

Thanks in advance


Hi Chris, thanks for getting back in touch

 

Your accountant is correct in that you wouldn't need to enter any year-to-date information when running payroll for an employee in the first tax month of the year. 

 

Based on the lower earnings limit for the class 1 National Insurance thresholds for 2024/25 it would also be right that there is no NI deduction (based on your wife's monthly income from your business). 

 

If you are unsure of the payroll calculation in QuickBooks, we would recommend checking this alongside HMRC's PAYE calculator as the figures produced here should match QuickBooks exactly. 

 

If the figures do not match, or if you need any further support, please don't hesitate to reach back out. Thank you. 

1 reply

A
ArielI
April 29, 2024

It's great to hear you're expanding your business and involving your wife in your operations. I can imagine how challenging it must be to encounter issues with payroll processing, especially with QuickBooks Online (QBO). Let's go through the possible reasons and steps you can consider to resolve the issue of incorrect NI (National Insurance) contributions and the unusually high tax rate showing up on your wife's payslip.

 

The tax rate applied to your wife's salary from your business is 50%, which is unusually high considering her income level. For this, I recommend chatting with a tax professional or referring to the official HMRC guidelines for the most accurate and up-to-date information.

 

For more detailed information about the calculation of your income, you are free to check out this article: Income Tax calculation guide.

 

Moreover, regarding your concern about National Insurance (NI), make sure that your wife is under Annual in the calculation methods, as she is an employee who is paid irregularly. I can show you how:

 

  1. Go to Payroll and click Employees.
  2. Choose the specific employee for whom you wish to adjust settings.
  3. In the Tax information, click the Pencil icon to edit.
  4. Click the Company director drop-down and choose Yes.
  5. On the Directors calculation method drop-down choose Annual.
  6. For Appointment date, select the effective date this person was appointed as the company director.
  7. Click on Save to finalize the changes.

In addition, you can refer to the following article for more comprehensive guidance on updating a company director in QuickBooks Online Standard Payroll: Add or remove a company director in QuickBooks Online Standard Payroll.

 

For future help, you can generate a payroll report to get a list of your employees and a summary of your company's payroll expenses.

 

If you have further questions about tax rate and NI, you can comment below, and we'll respond to you as soon as possible.

H
hello-theprintsmAuthor
April 30, 2024

Hi @ArielI 

 

Thank you for your response.

Actually, my wife isn't employed as a director - my accountant advised that given her current 'other' job and her part-time salary being paid via my business, it would be more tax efficient to have her as an employee.

 

I have since found out that as her salary in the business falls below the NI threshold, she doesn't have to contribute and nor do as as her employer.

 

And finally, and after looking through you guidelines, I realised this, as her first pay day falls in a 'new tax year', in her payroll profile, I should enter her salary paid via the other employer for this tax year only (obvious really now I see it). I entered the amount she was paid for the last tax year and so QBO thinks she was paid £30k per month! (that would be nice!!). 

 

I am sure this is the reason - does that sound right to you @ArielI ?

 

Thanks again

G
GlinetteC
April 30, 2024

I appreciate your getting back and providing additional details on the issue of your wife's tax rate and NI.

 

Yes, I agree. Based on the information provided, your understanding is correct. Your wife's salary being below the threshold means she is not obligated to make National Insurance (NI) contributions. This aligns with the current regulations, which state that individuals earning below the threshold are exempt from making such contributions. 

 

Further details are available in this article: Rates and allowances: National Insurance contributions.

 

In addition, you can generate payroll reports to obtain a detailed breakdown of your employees' wages, deductions, and tax information during a specific period. 

 

If you have any further concerns or questions regarding NI contributions or other matters, please don't hesitate to let us know in the comments. We're here to assist you.

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