If you have your own company or self-employed business and have a spouse/civil partner who does not generate any income, there may be some financial benefit to employing them to work for you.
You can do this by adding them to your payroll if you have one and paying them enough money to cover their income tax personal allowance. This is a tax free income and can be set off against the business profits as an expense.
Another advantage of doing this is that there will be a small amount of Class 1 National Insurance Contributions (NICs) for the spouse/civil partner to pay which will go towards their state pension and other benefits that can be claimed from the government. You can find which benefits are dependant on Class 1 NICs by clicking here.
If you do decide to go through with the above, it is not enough to only add them to the payroll, you will need to show that they are actually working for you which can be done with some minor secretarial or admin work. If you have a limited company you can make them a company secretary to provide additional evidence.
With limited companies you can take this a step further by making your spouse/civil partner into a joint director of the business allowing income drawn by the company to be shared by your personal allowances and tax rate bands. This can effectively double the amount of income you can draw at a lower rate of tax depending on how you split the company’s shares.
Be aware that this also means you are giving your spouse/civil partner a portion of your company. In addition you will need the relevant documentation to make things official rather than just saying they have joint ownership.
If you feel you would like any advice or assistance on the above, please do not hesitate to contact us.
