In this video, we look at one of the most common questions we get asked, ‘Can I pay my wife a wage?’. This is usually paying your wife/partner/husband as a an ’employee’ of your limited company.

Why pay your wife/husband a wage or salary?

In case you were wondering why this is even something that you may want to consider, it’s simply to save tax! That’s why we get asked this question in 90% of cases. In reality, there may be real situations where it’s a husband and wife business and it’s not just for tax planning reasons.

Commercial basis

In order to justify a salary or wage to a spouse, he or she needs to have an active role within the business. It could in theory just be a ‘paper exercise’ but this is not recommended as it will not be considered allowable by HMRC in the event of an investigation.

What is a ‘commercial basis’?

This is basically what it would cost the business if you were to hire / employee a normal worker that is not connected to the business. For example, it would not be considered a commercially justifiable wage to pay your partner the equivalent of £80 an hour to do the ‘office cleaning’! However, if the amount was closer to say £10 an hour then it would more than likely stack up under scrutiny.

Other considerations

Other considerations and questions that could arise as well as the common ‘Can I pay my wife a wage’ are;

• Does my wife/husband need to be a shareholder?
• Should my wife or husband be a director?
• How much can I pay my partner?
• Do I need to set up a limited company to pay my partner a salary?
• Can I employ my children?
• Will it affect our family’s tax credits?

These are all common questions that can be significant. For the purpose of this blog post we haven’t got the time to go into super detail. If you would like some further advice on the subject feel free to email me via stephen@cheltenhamtaxaccountants.co.uk or contact us on the telephone.

This video explains the options in a bit more detail.