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Employing Your Spouse

By: Jeff Durham - Updated: 17 Jan 2021 | comments*Discuss
 
Employing Your Spouse Work Family

When running a business having your spouse to work for you can have its advantages. Here we look at good and bad points when employing spouse.

Pros

Employing your spouse can often bring many benefits. There's the 'trust' element of feeling secure in leaving your spouse to work unsupervised knowing that quality or productivity is not going to suffer as a result of your absence. It can also be beneficial for start-up businesses where money may be tight and your spouse may be prepared to sacrifice their pay levels in the short-term for longer term reward. You can benefit from greater shared values and long-term common commitment and there is often a willingness to sacrifice oneself for the good of the business as a whole.

Cons

On the other side of the coin, however, it's crucial that you aren't seen to be treating your spouse more favourably than other members of your staff, especially if he/she is employed to do the same job as others. Preferential treatment can cause resentment amongst other employees and lower staff morale. There is the possibility that your spouse does not possess the necessary skills and personal attributes required of the job.

Demarcation Lines

There is also the issue of Balancing Your Work and private lifeand work life separate. If you're not careful, your breakfast table can soon take on the air of a boardroom table with business talk or arguments about the way the business is operated soon becoming an unpleasant everyday feature. Therefore, clarification of how, where and when work should be discussed should be agreed first to ensure you can keep your family life and business life as separate as possible. However, you should also allow sufficient designated time and the right place in which you can discuss work and iron out any problems you may be experiencing in an environment which does not impact upon your personal lives or the lives of other family members.

Tax Implications

It is quite common to employ a spouse in a business and be able to pay them tax free up to a certain level - taking account of the personal tax allowance (£11,850 p/a 2018-19) and National Insurance contributions (threshold is up to £162 per week). However, the Inland Revenue may take interest in this payment if it is not commensurate with the duties your spouse performs so care does need to be taken. If your spouse is paid no more there are no National Insurance Contributions to pay. They will be credited for contributions for that period which will count towards a state pension and other benefits. You will need to ensure that a P60 is completed and that your spouse is included on the Annual PAYE Return. You are also required by law to ensure that you at least meet minimum wage obligations.

In cases where the business profits are taxed at the higher rate, it may be worth considering bringing in your spouse as a partner, not solely as an employee, as they can also share in the profits.

Whilst many couples have thrived by working together it's important to ask yourself the following questions before taking the step of employing your spouse:

  • Do they truly want the job
  • Are they willing to gain respect from their colleagues for the work they do and not because of their Family Connections
  • Is my spouse really suitable for the work they will be doing
  • Will we be able to keep our work life and family life separate

Employing your spouse can often bring many benefits, however, it's crucial that you aren't seen to be treating your spouse more favourably than other members of your staff.

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Hi I have a question, First this is my current situation. I am a retired teacher drawing a small ish professional pension and working as supply for an agency. I therefore have these two incomes on which I pay tax. My wife started a small shop selling handmade jewellery and other items. This has now been running for about two years. Recently, when not working in schools I have been practicing a bit of jewellery making myself and it turns out, I'm quite good. It has been suggested that I make pieces to be sold in my wife's shop. Now the question. Although I would not be taking payment from her business for any work I do are there tax implications for either myself or my wife that we need to be aware of? Thanks in advanceMark
Barbarossa - 17-Jan-21 @ 7:07 AM
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