Simplest way to pay unemployed spouse for some admin work

BeePeeAitch

Hi, I'm Self-employed and pay basic-rate income tax. I would like to pay my wife for a few hours a week admin, packing and posting items, home-office cleaning etc. She isn't employed.

I also do my own accounts, and submit them to HMRC via my accounting software. It's all very simple and I want to keep it simple. I'm not looking to start PAYE, register as an employer, start a Limited company or a partnership. If it's relevant, I'm not VAT registered. Also, we currently take advantage of Marriage Allowance to offset some of her personal tax allowance.

So... If I were to pay my wife, say, £13 p.h. for 4 hours a week (£2704 p.a.) and record that as an expense, I think that's kosher?
I also think that's £2704 p.a. is below the level that I'd need to register as an employer, but as it's over £1000, my wife would have to be registered as self-employed, correct? 

Right now this is a fact-finding mission and I'd appreciate any correction, comment, opinion or suggestions for a better way to do this. I realise that replies won't constitute financial advice and that I should eventually consult an accountant 

Thanks! 

MyRealNameToo

BeePeeAitch said:

Hi, I'm Self-employed and pay basic-rate income tax. I would like to pay my wife for a few hours a week admin, packing and posting items, home-office cleaning etc. She isn't employed.

I also do my own accounts, and submit them to HMRC via my accounting software. It's all very simple and I want to keep it simple. I'm not looking to start PAYE, register as an employer, start a Limited company or a partnership. If it's relevant, I'm not VAT registered. Also, we currently take advantage of Marriage Allowance to offset some of her personal tax allowance.

So... If I were to pay my wife, say, £13 p.h. for 4 hours a week (£2704 p.a.) and record that as an expense, I think that's kosher?
I also think that's £2704 p.a. is below the level that I'd need to register as an employer, but as it's over £1000, my wife would have to be registered as self-employed, correct? 

Right now this is a fact-finding mission and I'd appreciate any correction, comment, opinion or suggestions for a better way to do this. I realise that replies won't constitute financial advice and that I should eventually consult an accountant   

How are you going to defend that she's not an employee? 

Does she have any other income? If not then keep her salary under £96/week and you dont need to register as an employer, dont need to do PAYE and you dont need to have EL insurance as shes a close family member and dont need to offer a pension. 

People "employing" their close relatives can be a red rag to HMRC to check they are genuinely working and it's not just tax evasion. Ensure you can evidence that she's working; Id certainly be keeping the home cleaning off the list of her official duties. 

BeePeeAitch

Thanks for your reply...

How are you going to defend that she's not an employee? 

I wasn't sure if it even became an issue if the amount was under the £5k a year thing. 

Does she have any other income? If not then keep her salary under £96/week and you dont need to register as an employer, dont need to do PAYE and you dont need to have EL insurance as shes a close family member and dont need to offer a pension. 

No other employment, but there is some freelance remote secretarial work on the cards, which she'd probably start at the same time (and would have to be self-employed for anyway).

...check they are genuinely working and it's not just tax evasion. Ensure you can evidence that she's working; I'd certainly be keeping the home cleaning off the list of her official duties. 

Ok thanks, yes I genuinely need some help with the admin side of the business and it seems a shame not to capitalise on that. The office space is at home, so yea might forget the office cleaning thing 😅

Very helpful thanks! The next thing we need to work out is how this affects my wife's NICs... 

Dazed_and_C0nfused

BeePeeAitch said:

Thanks for your reply...

How are you going to defend that she's not an employee? 

I wasn't sure if it even became an issue if the amount was under the £5k a year thing. 

Does she have any other income? If not then keep her salary under £96/week and you dont need to register as an employer, dont need to do PAYE and you dont need to have EL insurance as shes a close family member and dont need to offer a pension. 

No other employment, but there is some freelance remote secretarial work on the cards, which she'd probably start at the same time (and would have to be self-employed for anyway).

...check they are genuinely working and it's not just tax evasion. Ensure you can evidence that she's working; I'd certainly be keeping the home cleaning off the list of her official duties. 

Ok thanks, yes I genuinely need some help with the admin side of the business and it seems a shame not to capitalise on that. The office space is at home, so yea might forget the office cleaning thing 😅

Very helpful thanks! The next thing we need to work out is how this affects my wife's NICs... 

If you are employing her but not reporting any information to HMRC under the Real Time Information system then it won't as they won't know anything about it (from an NI history perspective).

BeePeeAitch

Dazed_and_C0nfused said:

BeePeeAitch said:

...  The next thing we need to work out is how this affects my wife's NICs... 

If you are employing her but not reporting any information to HMRC under the Real Time Information system then it won't as they won't know anything about it (from an NI history perspective).

Ok makes sense. So presumably this is ok, and doesn't upset the HMRC at all? 

When my wife took a look at her Pension and NICs earlier this week, everything seemed ok, and she's already receiving child benefit for our under-12yo, so already getting Class 3 contributions. I wondered if that would stop as soon as she registers self-employed, but can't find the info on it yet. 

SVaz

If you pay her under the LeL, you don’t register as an employer,  you simply add her wages an an expense.
If she’s not receiving CB/ getting NI credits,  it’s wise to pay her slightly above the LeL so she gets credits but neither you or her pay NI * BUT* -  do that and you have to register as an employer,  run payroll AND register as exempt from auto enrolment with the pensions commission.  

It’s all a bit of a faff but once it’s set up she could run her own payroll with hmrc basic payroll service,  just involves inputting pay details monthly and sending an end of year submission. 
It’s how I employ my own Wife, she does all the admin and I pay her £7k a year. 

SVaz

https://www.gov.uk/government/publications/basic-paye-tools-user-guide/basic-paye-tools-user-guide