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. However, the employer (your limited company) will be required to notify HMRC by filing a P35 and a P14 form each year.
This would include the wife’s wages, even though no deductions may have been made. HMRC requires these to be submitted because they want to know that no other benefits were being made available.
If the wage was at a rate above the Lower Earnings Level (LEL) for NI purposes, currently £123 per week (for 2023-24), but below the Secondary Earnings Threshold (ST) currently £175 per week (for 2023-24), no employer or employee National Insurance would be payable on the salary.
Even though no deductions are being made, it would be in your wife’s interest for a P35 and P14 to be submitted by your limited company. This is because that level of salary would provide her with a qualifying year towards state benefits, such as state pension.
Visit GOV.UK for the latest National Insurance Rates and Thresholds.
About the Author
James Poyser is the CEO at inniAccounts, an award-winning online accountancy service for contractors and consultants