I am a programmer registered as a sole trader in UK, and I have around 40k GBP of annual income from my self employment. Apart from that, I also have a permanent job working for a UK employer, where my salary is ~100k GBP.
Because of my main employment, when I submit my self assessment form to HMRC, I pay a very high tax on my self-employment income (almost half). I was wondering if I could set up a limited company and appoint myself and my wife as directors, so that we could reduce the amount of tax on dividends in the following way:
I could be responsible for the actual programming work, and my wife - for accounting, customer communication, and other tasks that she's qualified in.
I could have a smaller share in the business, so that she gets most of the dividends (the amount of programming work that I currently do is not very big; I mostly provide technical support, so this kind of split would be fair).
When I receive the dividends, and record them in my Self Assessment form, I pay a smaller amount of tax compared to the tax I currently pay as a sole trader, because the dividend amount is lower.
When my wife receives the dividends, and records them in her Self Assessment form, she pays little to no tax on them, because she has no other income.
The dividends are paid several times a year (we need the money regularly, so payouts once a year would not be enough)
Can anyone advise whether this scheme is worth setting up from the tax point of view (and valid from the legal point of view)?
