How your spouse or partner can help reduce your tax bill
Does your partner help with the paperwork, take business telephone calls, clean overalls, organise travel or carry out other tasks associated with your business?
Any of these tasks would justify a salary payment. The main exception is entertaining which the HMRC doesn’t accept as work.
With the new super tax rates being introduced in 2010/11 the savings could be as high as 51% of the amount paid
Two important points are that the salary must be justified and it must actually be paid.
The best savings are to be made when the partner has no other income but there are still worthwhile savings when the partner is in a lower tax band.
Your partner must be treated the same as any other employees and the proper PAYE code applied. If they have other employment income you will have to deduct basic rate income tax.
If the amount paid is lower than £95 a week and they have no other income there will be no tax or NI to pay. You should complete a P46 as verification.
Any payment of over £95 a week would qualify for pension entitlement.
If the amount is over £476 per month or £110 per week you would need to pay NI and tax
You may be able to achieve even greater savings by making your partner at home your partner at work or by involving them in your limited company. However it is best to take professional advice before you do so.
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