Some 60% of UK businesses are family owned, and, in an earlier post, I looked at the possibility of employing a spouse or partner in our family business, in order to reduce our year end tax bill with some extra wage costs.
That’s all very well, but what about the kids? Can we pay them a salary too? Everyone, including our children, has a tax / NI free personal allowance of around £5,500, so can we use this to our advantage?
The simple answer is; “Yes”, so here are a few of the basics:
The Children And Young Person’s Act states that no person under 13 years of age may be employed, other than in very specific areas, such as acting, modelling and sporting activities, so employing your 8 year old as head of marketing could just raise a few questions.
Under current legislation, the National Minimum Wage doesn’t need to be paid to workers in the family business, provided they are members of the employer’s family, and share the family home. That said, the more we can pay them, within reason the greater the expense, for tax purposes.
As with most things, common sense is the watch word here. We need to be able argue that our kids are performing tasks that are well within their capabilities. Many, these days, are highly computer literate, and may have done work for us on our web sites, spread sheets etc. Others may have helped us with despatching goods, filling mail shot envelopes etc.
So, as long as our kids are over 13, and they perform appropriate tasks, within our business, for a sensible salary, there is nothing to stop us paying them for work done, in order to reduce our business tax liability.
There is a wealth of legislation governing this, but, for most of us, it’s definitely worth some serious consideration.
That’s all very well, but what about the kids? Can we pay them a salary too? Everyone, including our children, has a tax / NI free personal allowance of around £5,500, so can we use this to our advantage?
The simple answer is; “Yes”, so here are a few of the basics:
The Children And Young Person’s Act states that no person under 13 years of age may be employed, other than in very specific areas, such as acting, modelling and sporting activities, so employing your 8 year old as head of marketing could just raise a few questions.
Under current legislation, the National Minimum Wage doesn’t need to be paid to workers in the family business, provided they are members of the employer’s family, and share the family home. That said, the more we can pay them, within reason the greater the expense, for tax purposes.
As with most things, common sense is the watch word here. We need to be able argue that our kids are performing tasks that are well within their capabilities. Many, these days, are highly computer literate, and may have done work for us on our web sites, spread sheets etc. Others may have helped us with despatching goods, filling mail shot envelopes etc.
So, as long as our kids are over 13, and they perform appropriate tasks, within our business, for a sensible salary, there is nothing to stop us paying them for work done, in order to reduce our business tax liability.
There is a wealth of legislation governing this, but, for most of us, it’s definitely worth some serious consideration.
1 comment:
Child labor is a bad idea.
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