Many small businesses involve all of the family at some point. Small business owners often come to Four Wealth Management with tax planning queries and are looking for legitimate ways to save the company tax.
If your wife does have a role in your company, for example, replying to emails or answering queries then you could consider adding her to the payroll.
It is important that you can prove that your wife does contribute to the business as HMRC can investigate if they do not believe she earns the money you are paying her. It is also important that the amount you are paying reflect the responsibility of her role and the hours worked. For example, you cannot pay her £100 per hour to do the cleaning.
All wages put onto payroll should be paid as they are earned not in one lump sum at the end of the year. Wages should also be supported by a formal employment contract or offer letter.
Do I have to pay my wife the national minimum wage for working for my business?
It is important to note that if a family member is employed but lives in the same household as the employer then there is no legal obligation to pay them the national minimum wage. This could also mean that you could consider putting your children onto the payroll as well if they have a small role within the business.
How much tax will my business save by employing my wife?
The tax benefit of paying your wife a salary is that a salary is a tax-deductible business expense which reduces the business’ corporation tax bill. However, you will need to make National Insurance contributions for all employees but you might be able to claim Employment Allowance to reduce the company’s overall National Insurance liability.
Should I set up a workplace pension for my wife through my company?
Another consideration is that you could set up a workplace pension for your wife. Any pensions that are paid through the workplace count as tax-deductible business expenses. It will also give your wife more income when she does retire.
Book a no-obligation meeting
Tax rules and allowances are complex and change often. Book a no-obligation meeting with a financial adviser at Four Wealth Management to help you manage your business finances and create a tax-efficient financial plan for your business’ future. Book online now or call us on 0117 973 0500.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
