3

I live in UK, and I have a full-time job with a salary that makes me a higher rate income taxpayer. Additionally, I am registered as a sole trader: I operate a software-as-a-service website, and I provide access to it for a fee. Because I already have a high salary from my main job, the income from my website is taxed at a higher rate (40%).

Is it legally possible for me to transfer the ownership of my website to my wife, who is currently a non-taxpayer, and have her receive all the profits into her own sole trader bank account? This would make the income from the website non-taxable, saving our family a considerable amount on taxes. In theory, I could give her exclusive administrative access to the website (all passwords, etc.), and she is totally capable of assuming all responsibility for it, including her becoming the GDPR data controller. The website itself is fully automated and does not currently require any regular work from my side to keep it operational (except for paying for web hosting once a year), so it's largely passive income.

Are such transfers considered legal in UK?

2 Answers 2

1

Are such transfers considered legal in UK?

Yes they should be fine.

Essentially, you've built a business. You can sell or gift it to anybody, including your wife.

So long as the income generated by the business is truly passive (as opposed to requiring your ongoing work effort), your wife simply profits from it as the owner. Easy-peasy.

3
  • Are there any gotchas for cases if some occasional (non-regular) work is required from me in the future? Would my wife need to hire me as a contractor to do such work?
    – geleyo
    Jan 29, 2023 at 22:56
  • @geleyo Strictly speaking, yes. If those occasions are indeed non-regular, she wouldn't need to pay you much and so, there would still be a significant tax benefit.
    – Greendrake
    Jan 29, 2023 at 23:11
  • This not the case for a one man business.
    – Neil Meyer
    Jan 30, 2023 at 14:50
0

A sole trader has no legal entity seperate from the owner. If somebody slips and breaks there ankle in a sole traders store when there is no sign the owner can be sued in his private capacity.

If the owner of a sole trading business dies then the business ceases to exist. There is also no distinction between the business profits and the owners income tax. It is one and the same.

The more important in your case is that ownership of sole traders are not transferable.

You would have to change the business type to a form of ownership where the business is a seperate legal entity if you want to bring your wife into the situation.

The thing is you can do that but all the money the business pays your wife will still very much count as income when payroll tax is paid.

In South Africa the burden of income tax ultimately falls on the individual. That means you cannot dodge income tax and have your employer be liable for not taking the taxmans cut of your salary. Uk tax authorities may very easily have similiar rules.

Many countries have strict laws about only having one permanent job also.

3
  • "Many countries have strict laws about only having one permanent job also." The UK is not one of them. Many (but not all) contracts of employment in the UK state that you can only do another job with their written permission. (Of course the OP's wife has no other employer to object.) Jan 30, 2023 at 15:47
  • "the money the business pays your wife will still very much count as income" absolutely - but she is entitled to £12,570 this year before she pays any tax (and quite a lot more that would only be taxed at 20% rather than 40%). "... when payroll tax is paid". Err no. If the OP's wife owns a business and it pays her its profits that isn't taxed under PAYE. (But even if it was, she would still pay no tax on it.) Jan 30, 2023 at 15:50
  • Why be concerned about the entity form at all? It's the asset (profit generating website) that is being gifted. From one sole trader to another, but that's irrelevant.
    – Greendrake
    Jan 30, 2023 at 19:48

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .