Self-employed status generally results in a lower tax liability than that of employment. Firstly, the rate of National Insurance self-employed people generally pay is 9% (as opposed to 12% if employed). And secondly, the ‘employer’ does not need to pay Employer’s National Insurance on their behalf either. Of these two options, people therefore tend to prefer being treated as self-employed.
You also have the option of transferring the business into a partnership and giving your wife a share of the profits.
However, you cannot simply choose to treat your wife as self-employed/ partner/ employed- it is really a question of the facts and HM Revenue & Customs (HMRC) have lots of guidance in this area.
We would recommend that you seek professional advice about how to remunerate your wife, before proceeding. Firstly, to check you are acting within guidelines and legislation and secondly, to calculate the tax position. Please feel free to contact us if you would like to be put in touch with your local TaxAssist Accountant.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.