if i am self employed and pay my wife say 100 pounds in the year does she have to declare this to the tax man?

Question

sorry i mean 1000!

as an employee

+ no other jobs

Answer 1

Well if that was all she earned in a tax year (and got no other earned income), then no.

We all have a tax threshold, under which no tax is due - currently I *think* it's about £4000 in a tax year. Meaning you can earn up to that amount and are not liable to pay any income tax.

Of course if she earns any other income then she may have to declare it!

Hope this makes sense!

Answer 2

The answer to your question, as you will have gathered by now, is no. She has a responsibility to inform HMRC of a tax liability for any tax year by the 5th October following the end of that year.

In your case her earnings are covered by her personal allowance so she does not need to notify.

But, two points arise on your situation which other people have alluded to.

Firstly, if you are to successfully claim a deduction in your own accounts then she must actually do some work for you and it must be at no more than the market rate.

Secondly, and this is very important, make sure that she signs a form P46. As an employer you have an obligation to deduct tax from any employee who earns more than £1. If you have no documentation then you must deduct at basic rate. A correctly signed P46 authorises you to only deduct tax when her earnings exceed the personal allowance.

This might seem silly and unnecessary but there are some very pedantic PAYE inspectors out there. I have come across a few in my time.

Answer 3

I reckon jseah has the best answer so far. Payment for services rendered (i.e. work) is taxable income (she pays tax). Expenses incurred as a result of your employment (or suchlike) is tax-deductible (you get the tax back).

But if the two of you pay tax at different rates, you don't come off even. If you're paying tax at a higher rate, the tax man loses. He doesn't like that, and may come back to you demanding to know what's going on once your tax return is in. So make sure you have evidence that the missus did genuine payable work.

On the other hand, if she's in a higher tax bracket, then what the x is she doing working for you?

ON the other hand, if it's a gift (awww!) then there are completely different rules. You can gift a stack to all kinds of rellies provided you don't die too soon afterwards. I think giving to your spouse is the easiest and least ..er.. taxing.

MORE breaking news! she's paying no tax. Yes, pay her, have her declare it, and claim it back. But have EVIDENCE - her handwriting on your ledger, timesheets, whatever.

Answer 4

Of course you do! It is income for her, despite where it comes from. You are paying your wife an income ( presumably for services rendered relevent to your business ) to minimise your own tax liability. The good news though is that £100 a year is almost nothing ( £2 a week ) so the tax liability will be nothing or minimal, unless she has other full/part time employment.

One thing crosses my mind though ..... £100 a year? Who works for that? You having a laugh? What can anyone do for £2 a week or less?

Oh I see ,,, breaking news ... a £1000 a year! Cheap labour eh?

Answer 5

Yes she does and you must include in your accounts as it is part of your turn over and will come under the heading of wages and expenses. If she does not declare it there will then be a link back to her from your accounts and it will be assumed that you are avoiding tax by doing so. If you are paying it as a wage you may need to prove that she is actually working for it.
Happy New Year.

Answer 6

Pay your wife for what? If you are paying her in the sense of her being an employee, then she could report this as income, but then you can report the payment as an expense. In a joint tax return, this would essentially cancel each other out.

Answer 7

If you are writing it off as expense (employee income) then yes she has to declare it. If you are taking it as income not expense, then consider it a gift and don't declare it from her end. Some one has to declare it though

Answer 8

She can have income of up to £5035 without being liable to tax. You can save tax by paying her, but she must be seen to be doing something for the business to justify her salary - and you must actually pay her.

Answer 9

get her to do "voluntary" work and give her the money as a gift.
Gifts between spouses are tax free.

Answer 10

you could pay her upto £5135 in any tax year