If you are contracting via a limited company, you may have considered paying your spouse a salary. An accounting expert tells us what the tax and payroll implications would be.
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 then you must pay her at least the National Minimum Wage.”
You can find out the current National Minimum Wage rates here (as of April 2022, the rate is £9.50 per hour for people aged 23 or over).
You can find out more about setting up a payroll for your limited company on the HMRC site, although if you use a contractor accountant, they will be able to 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’d like 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.