Accounts question
Discussion
I run a B&B with my wife as a partnership. I’ve been offered a job which I’m going to accept tomorrow, starting in April.
Are we better off making my wife a sole trader for the next financial year? Only she would be drawing a wage etc from our B&B, and whilst I’ll still be doing bits and bobs I’ll be taking a back seat and no longer drawing a wage from it.
I dont know much about all this - I’ve asked my accountant this question but no reply as yet, and I’d like to have an idea pre accepting the role!
Thanks
Are we better off making my wife a sole trader for the next financial year? Only she would be drawing a wage etc from our B&B, and whilst I’ll still be doing bits and bobs I’ll be taking a back seat and no longer drawing a wage from it.
I dont know much about all this - I’ve asked my accountant this question but no reply as yet, and I’d like to have an idea pre accepting the role!
Thanks
In the situation where a business is being run as a sole trader or a partnership, the proprietor(s) is not taxed on what they draw from their business (what you are referring to was "wages") but in the case of a sole tradership or partnership are actually referred to as "Drawings".
Sole traders are taxed on the actual profit of the business BEFORE any drawings are accounted for.
Partners as individuals are taxed on their share of the partnership profits BEFORE any partners' drawings are counted for.
An example
A sole trader business makes a profit of £80,000 BEFORE Drawings
The proprietor takes out £50,000 as Drawings.
The proprietor will be taxed on £80,000 - not £50,000.
A partnership business makes a profit of £80,000 BEFORE Drawings.
The partners share profits equally
The partners each take out £20,000 as their Drawings.
The partnership profits are split 50/50 to each partner i.e. £40,000
Each partner is taxed on £40,000 - not the £20,000 drawings they took out for themselves.
Sole traders are taxed on the actual profit of the business BEFORE any drawings are accounted for.
Partners as individuals are taxed on their share of the partnership profits BEFORE any partners' drawings are counted for.
An example
A sole trader business makes a profit of £80,000 BEFORE Drawings
The proprietor takes out £50,000 as Drawings.
The proprietor will be taxed on £80,000 - not £50,000.
A partnership business makes a profit of £80,000 BEFORE Drawings.
The partners share profits equally
The partners each take out £20,000 as their Drawings.
The partnership profits are split 50/50 to each partner i.e. £40,000
Each partner is taxed on £40,000 - not the £20,000 drawings they took out for themselves.
Adogg- you CAN vary the share of each partner's attributable profits.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
Adogg- you CAN vary the share of each partner's attributable profits.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
Countdown said:
Adogg- you CAN vary the share of each partner's attributable profits.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
Thank you!In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
I don’t really want to take anything from it next financial year as I’ll be salaried elsewhere, and our profit isn’t enough to worry about!
Countdown said:
Adogg- you CAN vary the share of each partner's attributable profits.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
Would that not depend on the ownership share of the property?In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
KevinCamaroSS said:
Countdown said:
Adogg- you CAN vary the share of each partner's attributable profits.
In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
Would that not depend on the ownership share of the property?In other words - you don't have to be 50:50 partners, you can be 99:1
How you choose to share it is up to you. You may want to split it in such a way that you both maximise using your tax free allowances / 20% tax bands.
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