One For The Income Tax Experts.

[711]

I could find the answer to this on the HMRC website, but the sometimes half hour wait to speak to a human being is soul destroying. So - hypothetical situation:-
My wife and I are both retired. We have a small business which generates £8000 p/a. which is paid into our joint account. After pensions etc. have been taken into account, I have £2000 tax free allowance remaining and my wife has £6000 remaining. As we have a joint account, is any income deemed to be split equally, i.e: £4000 each, or are we allowed to split it to use up both of our outstanding allowances?
Thanks.

[Flonska]

You say you have a business. If you have an accountant, I suggest you talk to him/her since they will have all the relevant information to help arrange your tax affairs properly.

[Flonska]

In some instances, it is possible to transfer part of your personal allowance. This link explains how it works:-

https://www.moneysavingexpert.com/family/marriage-tax-allowance

[Islay]

The transfer of allowance is worth £25 a month in real money but more in tax money! Yeah I know that sounds Irish!! Also in some circumstances it can also be backdated for a whole tax year.

[Kidas]

It depends on how the business is structured.

If it is a separate company, the the revenues will be assigned according to your respective shareholdings.

If it's a partnership and you have told HMRC that you are self-employed (or partially self-employed), then you can decide how much time, effort, experience and resource each of you puts into the business, and assign the earnings according to that division.

On such a small business, I suspect (though you should seek professional advice) that you can just decide to assign the earnings in the way that is most tax-efficient, provided you can somehow justify the split you choose according to how much time, effort and experience each of you contributes.

Good luck!

[furrypusscat]

Look into the marriage allowance, I know you can transfer some there to offset. I can't remember how much now it equates to.
As suggested, if you have an accountant he/she should point you in the right direction to give you the best ways around tax issues.

[Kidas]

Just thinking about this a bit more, you might consider setting up separate accounts for each you, specifically to receive payments from the business.

The business can then pay each of you according to your respective contributions (whch might – purely coincidentally – be the most tax-efficient split). That way you have some evidence to show HMRC of the different payments made to each of you.

Once you have received the money, each of you can independently transfer it into the joint account, as you wish.

I suspect (but again seek professional advice), that if the business pays the whole lot into a joint account, then the HMRC probably would see it as a 50-50 split.

[DocHH]

If the way your business is set up allows, have you considered paying yourselves dividends on the shares, rather than just paying profits into a joint account. This tax year you can receive £2,000.00 each in dividend payments without paying any tax.
That leaves you just receiving £2,000.00, the rest of your tax free allowance, and your wife well within her tax free allowance. BUT I am not a tax advisor, so professional advice is advisable.

[ubasses]

The Bank account is irrelevant here, once the money is deposited all of it is deemed to be the property of both of you. Only any interest earned would be split 50/50 for tax purposes.
HMRC are only interested in how much each of you have earned as individuals, and that you pay any tax due on those amounts. As DocHH has advised you could take a lower salary and pay dividends after the Company has paid it's tax, but only if you are a Limited Company.