Do I need to inform HMRC if I pay my wife a small salary via my company?

A reader asks if he needs to inform the authorities if he wants to pay his wife a small salary for ‘administrative’ work done for his company. The question has been answered by James Poyser

Your wife is not required to notify HMRC about the wage as long as it is her only source of Income and no unpaid tax will arise.

The employer, however, may be required to notify HMRC by filing a P35 or P38A and a P14.

For an incorporated business (limited company), HMRC would require that a PAYE scheme is in place and therefore a P35 and P14’s are submitted each year and this would include the wife wages even though no deductions may have been made. This is because they would want to know that no other benefits were being made available.

For an unincorporated business (sole trader or partnership), no notification is required if there is not already a PAYE scheme in operation.

The business would, however, need the wife to complete a P46 form to declare that the wage is her only source of income now and at any time during the tax year.

If the wage was at a rate above the Lower Earnings Level (LEL) for NI purposes currently £111 per week (for 2014-15), but below the primary Earnings Threshold (PET) currently £153 per week (for 2014-15), then even though no deductions would be made it would be in your wife’s interest for a P35 and P14 to be submitted by the employer as at this level of salary she would qualify for state benefits.

Visit GOV.UK for the latest National Insurance Rates and Thresholds.

About the Author

James Poyser is Product Director at inniAccounts, an industry leading online accountancy service for contractors.

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Last updated: 16th June 2019