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Employing Your Spouse Or Civil Partner In Your Business

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You may wish to consider employing your spouse in the business. Providing the wage is commensurate with duties performed then the wage will reduce the taxable profits of the business. A salary of between £5,824 and £8,112 will not create any additional National Insurance (NIC) but could increase their entitlement to basic and additional state pension. The employee will pay national insurance at 12% on any amount paid to them over the primary NIC threshold which is £8,060 for 2015/16 but no income tax is payable on the additional salary until the personal allowance £10,600 for 2015/16 is reached.

An additional consideration is the ability to claim an employment allowance of up to £2,000 a year which reduces the amount of secondary (class 1A) employer’s NIC payable. This allowance is available to most employers.

It is possible to make savings by paying a slightly higher salary to utilise some of this employment allowance. The additional salary is deductible for corporation tax purposes, saving corporation tax at 20% or from business profits saving tax for the business owner at their highest rate of tax.

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