08 Nov Employ Your Family!
If a member of your family has no other income, you could employ them in your family business and save a significant amount of tax for the family as a whole.
Care must be taken to ensure that the arrangement is commercial and the level of pay is commensurate with the duties performed to avoid an attack from HMRC.
The National Minimum Wage rules also need to be considered, although the National Minimum Wage does not apply to directors unless they have a contract of employment.
Employing Your Family
John’s wife Kelly has no income but spends a considerable amount of time answering the telephone in John’s home office and dealing with correspondence.
She also has the task of keeping track of the accounts, for which she is not paid.
By paying her a salary he can reduce his own exposure to higher rate tax and utilise her personal allowance and, depending on the level of salary, her basic rate band, and reward her for the efforts she puts in on behalf of the business.
This simple strategy can save several thousand pounds in tax along the way.