Employ Your Family
You could employ a member of your family in your family run business, and save a substantial sum of tax for the family as a whole, providing they have no other income.
Care must be taken to ensure that the agreement is business-related and the level of pay is relative to the duties executed to evade suspicion from HMRC.
The National Minimum Wage rules also need to be taken into account, although these rules do not apply to directors, unless they have a contract of employment.
Example –Sarah’s husband Ian has no income, but spends a significant amount of time answering the phone in Sarah’s home office and dealing with communication. He also completes basic accounting duties, for which he is not paid.
By paying Ian a salary, Sarah can lessen her own exposure to higher rate tax and exploit Ian’s personal allowance and, subject to the level of salary, his basic rate band, and incentivise him for the efforts he puts in on behalf of the business.
This simple tactic could save YOU several thousand pounds in tax over a period of time.