The small business owner has traditionally used payment of wages to the spouse of the owner as a tax saving device. In essence, the wages paid are an expense of the business so reducing the taxable profits, whilst the spouse who has no other income can receive up to the level of their annual personal allowance (presently £5035) tax free.

However, to take advantage of this you should note the following...

1. The wages must actually be paid. An accounting adjustment will not suffice!
2. The wages must be for work done. If the spouse does no work there can't be any wages.
3. You should comply with all PAYE procedures. In fact, completion of the annual P14/P60 will help ensure that the spouse receives credit for a years NI contributions without having to pay any NI (wages in the magical band of £84 to £97 per week achieve this).

Many small business owners are helped out by their spouse even if it's simple task such as message taking, keeping the books, typing quotes, etc.

The rule about how much you can pay for work done is that is should be a "commercial rate of pay". The minimum you will be able to justify will of course be the national minimum wage of £5.05 per hour. However, you should consider what you would have to pay someone else to do this job to help justify a higher amount. Asking an agency would be good evidence to back up your rate.

Consider the hours where the spouse needs to be available even if not actually undertaking the task. For example, taking phone messages may just be the odd minute here and there but the spouse may need to effectively be on call for a far longer period of time which could justify a higher wage.

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