One simple way that the self employed can cut their tax bill.
Employing family members, such as a wife, is a simple way for business owners to save tax - in particular those business owners whose spouse has no other sources of income in their own right.
However, you can’t just pretend that your spouse works for you, you must be able to demonstrate that they a) contribute to the business and b) are not paid more than a third party you could have employed instead.
As long as you can tick those boxes, plus you pay your spouse above the minimum wage, you can deduct their pay as an allowable expense from your business profits. Furthermore, if you pay your spouse between £97 and £110 per week (for 2010/11) they will not have to pay National Insurance Contributions (NICs) or income tax, plus they will also protect their entitlement to a basic state pension and other benefits.
If you think you could benefit from the above concept then speak to your accountant in the first instance.
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