How complicated is it to pay your wife?

[d000hg]

I'm doing some plan B stuff right now and am actually getting my wife involved with some online research, sending contact emails, etc. She is currently unemployed so I'm wondering about paying her for her time. Only for genuine work, not taking the pee. As soon as she starts her next job it'd probably stop because either she wouldn't have time, or it wouldn't be worth the hassle of having two incomes for her.

Is it as simple as hiring any other freelance worker i.e. get her to submit me an invoice/timesheet and I pay her, like I do my overseas coders? Or are their any gotchas?

[Clare@InTouch]

You could either add her to the payroll as an employee, which would be quite simple, or she could invoice you as a freelancer. The downside to the latter suggestion is that she'd then have to register as self employed and complete a tax return each year.

This assumes you have a PAYE scheme for Plan B of course.

[Wanderer]

I'm wondering about paying her for her time. are their any gotchas?

Your LTD could pay her but if she earns (or will earn) over £7500 this tax year then there will be PAYE, Employee's NI and Employer's NI on the salary as well as having the admin of setting her up as an employee.

Presuming you are outside IR35, you are probably better off having her as a shareholder and income splitting using dividends. If she is already a shareholder and she will earn over £7500 this year than I would suggest that you just continue with the dividend income splitting arrangement.

The standard dividend splitting caveats apply though - if she already earns a fair amount of money then the dividends from the company may push her into the higher rate tax bracket so you might want to have an uneven split of shares, say 70% to you and 30% to the wife depending on her income level and your company turnover.

[ASB]

Your LTD could pay her but if she earns (or will earn) over £7500 this tax year then there will be PAYE, Employee's NI and Employer's NI on the salary as well as having the admin of setting her up as an employee.

Presuming you are outside IR35, you are probably better off having her as a shareholder and income splitting using dividends. If she is already a shareholder and she will earn over £7500 this year than I would suggest that you just continue with the dividend income splitting arrangement.

The standard dividend splitting caveats apply though - if she already earns a fair amount of money then the dividends from the company may push her into the higher rate tax bracket so you might want to have an uneven split of shares, say 70% to you and 30% to the wife depending on her income level and your company turnover.

Paying her up to the nil rate band assuming no other income is far more cost effective. It will reduce the profit and consequently tax of the paying venture, but she will pay nothing. Divis would come from post tax income.

[Taxless]

I'm doing some plan B stuff right now and am actually getting my wife involved with some online research, sending contact emails, etc. She is currently unemployed so I'm wondering about paying her for her time. Only for genuine work, not taking the pee. As soon as she starts her next job it'd probably stop because either she wouldn't have time, or it wouldn't be worth the hassle of having two incomes for her.

Is it as simple as hiring any other freelance worker i.e. get her to submit me an invoice/timesheet and I pay her, like I do my overseas coders? Or are their any gotchas?

Whatever you do, don't treat her as a freelancer on a self employed basis without a lot more work being put into the arrangement.

If HMRC ask questions then you have to prove she was truly self employed. If she only works for you doing jobs that you tell her how to do and when etc., then she is not self employed (ring any IR35 bells?).

On that basis HMRC will insist that she is an employee and anything you have paid her is net of PAYE, employees & employers NIC. They will look to gross up the net payments and the company, as the employer, will be liable to pay it all, plus interest, plus the new in-year, cumulatiive, monthly penalties for getting it wrong.

With the proposed yearly 50,000 business records checks HMRC are rolling out, I suspect you will fall within the SME bracket they are targeting and so you will almost certainly get one of these checks.

[d000hg]

You can certainly hire a secretary freelance. They work 100% at your direction but they're still not an employee, are they?

[Taxless]

You can certainly hire a secretary freelance. They work 100% at your direction but they're still not an employee, are they?

I assume you refer to someone with no connection to the company or the controlling director, someone who clearly has all the trappings of being in buiness on their own account and who has more than your company as a client.

If you are paying your wife to help as and when you need her and she does not have the trappings of self employment, no other clients, no ability to send a substitute etc, then you can't simply claim she is self employed.

It comes down to the facts of each case but there is nothing that the queriest has mentioned so far that would imply self employment.

[prozak]

I pay my mrs £500 a month. Pretty straight forward as an employee... notthing to pay.

(::: Payroo.com - Free Online UK Payroll Software ::: - free online payroll for small companies, really good. submits online to HMRC also)


You should also seriously consider giving her some shares.

That topic has been discussed at length. What works for me is 80/20.

Some poeple go as high as 50/50.