Should I pay my spouse a salary?

If your spouse assists you with your business (whether a sole trade or a limited company) then you are entitled to pay him or her a reasonable wage for the services performed.

Whether or not this is tax-efficient will depend on whether the spouse has other income, and what is your marginal rate of tax. If your spouse has no other income and you are paying tax at 40%, then your tax bill will be reduced by 40% of the amount paid while your spouse will have no liability up to the level of his or her personal allowance. If you pay in excess of the personal allowance, then you will have to set up a PAYE Scheme and deduct tax and national insurance from the wages paid.

The salary paid should reflect the value of the work carried out. It is preferable to have a written contract, and the wages should be paid into the spouse’s own bank account.

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