HMRC often views salary paid to your wife or family members as a way of extracting money from your limited company at a lower cost. However, it may be that your spouse or partner provides a great deal of support to the business, providing office and administrative services that are vital to the day-to-day running of the company.
If this is the case you are perfectly entitled to pay your wife or partner a wage from the company and claim a tax deduction for this wage. You are free to pay them whatever you like as long as the wage would not be deemed excessive and above the market rate for the work that was being carried out.
As your spouse is classed as an employee you can also give them childcare vouchers of up to £55 per week or £243 a month.
However, paying your spouse or partner is not always tax efficient. If they have other sources of income above the tax free personal allowance you will end up paying more in income tax and NI than you will save in corporation tax. This should always be considered if you are thinking about paying your wife a wage.
You may also wish to consider bringing your wife into the company as a shareholder.
Dividends are generally paid in proportion to shareholding, so this can be another tax efficient method of extracting profits from your limited company if your partner has no other sources of income.
It is advisable however, if you are paying your wife a dividend, that the dividend is paid into a separate bank account in their name. This will demonstrate that they retain control of the money.
Simplyco are expert contractor accountants and give specialist advice to all the clients they work with. To learn more about the services we offer, please give us a call on 01900 898 440 or email email@example.com.
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