If you are contracting via a limited company, you may have considered paying your spouse a salary. An accounting expert explains the tax and payroll implications.
Paying your wife/husband a salary
We asked Emily Coltman from FreeAgent what the legal position is:
Yes, you can, but it’s advisable to make sure that your wife actually does some work in the company, such as answering the phone and opening mail, otherwise this could be challenged by HMRC.
If the company is not already registered as an employer with HMRC then you must register it and operate PAYE and NIC on your wife’s earnings
If your wife is not a director of the company, and does not have a contract of employment, then you must pay her at least the National Minimum Wage.
Further considerations
Claiming the salary as a business expense
As long as your spouse is genuinely performing work for the company and their salary is reasonable for their duties, the cost can usually be deducted as a business expense.
This reduces your company’s taxable profits and lowers the company’s Corporation Tax bill.
These are also generally allowable business expenses and could be a tax-efficient way to extract money from the company.
Record keeping and evidence
Keep proper records of your spouse’s work, such as timesheets, job descriptions, and email correspondence, as HMRC may request evidence to support the legitimacy of the employment arrangement.
Further information
You can find the current National Minimum Wage rates here (as of April 2025, the rate is £12.21 per hour for people aged 21 or over).
You can learn more about setting up a payroll for your limited company on the HMRC site, although if you use a contractor accountant, they can do this for you.
If you want to split shares in a new limited company with your spouse or gift some of your existing shares, you should also talk to your accountant first.
If you want to try FreeAgent’s impressive online accounting software, you can get a 30-day trial here. Contract Eye visitors can use code 23mzhk for an additional 10% off the ongoing subscription.
