Im self employed , can i pay my wife for admin work without she registering as employed?

Workingman1964

I started a very small craft type business about 2 years ago and sell my products via a web site. this is my only income . it only make about the same profit i would make if i worked at min rate for 37 hrs but thats enough for us. so you can see its a very small business, i am registered as self employed and pay tax on my profits as does any other business. (Im 60 and so is my wife), my wife doesn't work or claim any benefits (nether of us do). a friend that runs another small business tells me that i can pay my wife a reasonable salary for the work she does (she does admin and packing for me,, has done for  2 years but not paid). i would say she does about 2 hrs a day at least so i would pay her approx £25 a day and we work 6 days a week so thats £150 a week for her, thats approx £600 a month so  less than 8K a year.
Her PA is £12750 so she is well below that. does she need to register or inform HMRC if i pay her this way. i assume that this would reduce my tax as her wages come straight off my profit line. Anyone any advice ? dont want to upset HMRC but she really does work and i couldn't run the  business without her help.

DullGreyGuy

If you are paying her £123/week or more you are going to have to register as an employer, offer her a pension etc. 

Some will try and claim that she is self employed and providing you with services rather than being an employee but with no other clients, minimal work etc its unlikely to fly if they ever came knocking. 

Nomunnofun1

Workingman1964 said:

I started a very small craft type business about 2 years ago and sell my products via a web site. this is my only income . it only make about the same profit i would make if i worked at min rate for 37 hrs but thats enough for us. so you can see its a very small business, i am registered as self employed and pay tax on my profits as does any other business. (Im 60 and so is my wife), my wife doesn't work or claim any benefits (nether of us do). a friend that runs another small business tells me that i can pay my wife a reasonable salary for the work she does (she does admin and packing for me,, has done for  2 years but not paid). i would say she does about 2 hrs a day at least so i would pay her approx £25 a day and we work 6 days a week so thats £150 a week for her, thats approx £600 a month so  less than 8K a year.
Her PA is £12750 so she is well below that. does she need to register or inform HMRC if i pay her this way. i assume that this would reduce my tax as her wages come straight off my profit line. Anyone any advice ? dont want to upset HMRC but she really does work and i couldn't run the  business without her help.

No issue at all with paying your wife for work that she genuinely does - just make sure that she knows that she’s employed by you! 

A few points:

If you pay her over £123 per week you must register as an employer even though no NIC is payable - she will receive credits towards her state pension. 

https://www.litrg.org.uk/employers/setting-employer/registering-employer#:~:text=More%2520information-,Circumstances%2520when%2520you%2520need%2520to%2520register,or%2520%C2%A36%252C396%2520a%2520year.

You may decide to pay her, say, £120 per week without the need for registration for, say, 10 hours per week at £12 per hour in the knowledge that no NIC credits will ensue. 

The personal allowance is 12570. 

Workingman1964

Thanks Nomunnofun1 that's a big help, so it looks like she will be ok if i go for £12/hr 10hrs/Week then, i just checked out that link you sent and it says as long as its below 533 month thats ok, 120 a week is 520 a month so that will be safe.
many Thanks for the info and the link

Dazed_and_C0nfused

Workingman1964 said:

Thanks Nomunnofun1 that's a big help, so it looks like she will be ok if i go for £12/hr 10hrs/Week then, i just checked out that link you sent and it says as long as its below 533 month thats ok, 120 a week is 520 a month so that will be safe.
many Thanks for the info and the link

You can expect the £123/week amount to change to £96/week from 6 April 2025.

Her PA is £12750

I presume you mean £12,570 but as your wife has no taxable income at present then she can apply for Marriage Allowance and give up £1,260 of her Personal Allowance.  In return you get £252 knocked off your tax liability.  

It may be prudent for her to apply back to 2020-21, the earliest year available now, but she must check if it will impact her before applying.

For example if she had taxable income in some of those previous years she might make herself liable to pay extra tax as HMRC just check if you are both eligible, not if an application is of benefit to you as a couple.  

Nomunnofun1

Workingman1964 said:

Thanks Nomunnofun1 that's a big help, so it looks like she will be ok if i go for £12/hr 10hrs/Week then, i just checked out that link you sent and it says as long as its below 533 month thats ok, 120 a week is 520 a month so that will be safe.
many Thanks for the info and the link

Yes - I was giving a little leeway! 

Make sure that you physically make the payment through your bank account - it is not sufficient to simply make a bookkeeping entry. 

Workingman1964

Thanks Dazed_and_C0nfused  
understood about the change in amount , thanks for that. looks like her wages are getting less and less Hi Hi !
not going to try and put any back dated claims in, up till now she has been  a career so CA would have to be taken into account but as from Jan 2025  she will not be a paid career so any income she earns will just be what i pay her. she has over 40 years of stamp duty and so no affect on her state pension if she doesn't pay any more stamp now.
yes her PA is 12570, just typed it backwards! (must learn to type)
Thanks again for taking the time to reply.

Dazed_and_C0nfused

Workingman1964 said:

Thanks Dazed_and_C0nfused  
understood about the change in amount , thanks for that. looks like her wages are getting less and less Hi Hi !
not going to try and put any back dated claims in, up till now she has been  a career so CA would have to be taken into account but as from Jan 2025  she will not be a paid career so any income she earns will just be what i pay her. she has over 40 years of stamp duty and so no affect on her state pension if she doesn't pay any more stamp now.
yes her PA is 12570, just typed it backwards! (must learn to type)
Thanks again for taking the time to reply.

If her only taxable income in the 2020-21 tax year onwards is Carers Allowance I'm not sure what the issue is?  Presumably that is significantly less than her reduced Personal Allowance would be each year 🤔

Appreciate it is ultimately more for your wife to decide (she has to apply, you cannot claim it) but it could save you ~£1,000 for the latest 4 tax years (those to 5 April 2021, 2022, 2023 & 2024).  Assuming you are liable to tax of at least £250 in each tax year.

Albermarle

she has over 40 years of stamp duty and so no affect on her state pension if she doesn't pay any more stamp now.

You should check to be on the safe side, if not already done so of course.
Check your State Pension forecast - GOV.UK