Chartered Management Accountants | Milton Keynes
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:
It is important to apply the same principles when paying a spouse as you would when employing someone not connected to you.
As well as a salary, you may be able to pay premiums for a special pension arrangement for your spouse even if they are not required to be enrolled in auto-enrolment.
These should not be taxable on your spouse and should save you tax as a business expense provided that the overall salary package is reasonable in relation to the work done.
The total salary package is the amount which is considered when deciding whether the payments are justified under the wholly and exclusively rule.
All the above considerations apply equally to an unmarried partner or indeed to any other individual.
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 (£118 for 2019/20) 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:
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