Whether you need help with growing your business or advice on optimising your personal or family finances, we are here to help you get the best results.

Employing your spouse

When considering the overall tax position of your family, it is worth considering if you can justify employing your spouse in your business.

This is a means of transferring income from you to your spouse. It is likely to show a tax saving if your spouse has unused personal allowances or pays tax at a lower rate than you do.

In order to justify a salary, the following points must be borne in mind:

  • The level of salary must be commercially justifiable
  • The salary must actually be paid to your spouse (and therefore affordable for you)
  • The national minimum wage regulations are likely to apply

As well as a salary, you may be able to pay premiums for a special pension arrangement for your spouse, or you may be required to enroll them in an auto-enrolment pension arrangement. These should not be taxable on your spouse and should save you tax as a business expense.

All the above considerations apply equally to an unmarried partner or indeed to any other individual.

Administering a salary

If your spouse has no other employment, the starter form (previously P46) should be signed with the Statement B ("This is my only or main job") ticked. You may then pay up to the Lower Earnings Limit (£113 for 2017/18) without any further formality, provided that you have no other employees.

If you already have a PAYE scheme for other employees, or don't mind setting up a scheme for your spouse, you should consider the following points:

  • A salary between £113 and £157 per week will protect an entitlement to basic state pension and other contributory benefits without incurring any actual national insurance liability
  • A salary between £157 and £866 per week is subject to employees' national insurance at 12% and between £157 and £866 employers' national insurance at 13.8%
  • The income tax position depends on your spouse's personal circumstances
  • The amount of salary exceeding £866 a week is subject to employees' national insurance at 2% and employers' national insurance at 13.8%, without upper limit

Please contact us if there are any points you would like to discuss.