Last updated: 14 October 2026
How can a sole trader plan tax with a spouse or civil partner?
The main options are to employ your spouse at a fair wage for real work, or to take them on as a business partner so profits are shared. Either can use their Personal Allowance and lower tax bands. The pay or profit share must reflect what they actually do: HMRC can challenge wages that are too high for the work. You can also use the Marriage Allowance, transfer savings or property between you free of tax, and pay into your spouse’s pension.
Options compared
| Option | How it saves tax | Watch out for |
| Employ your spouse | Wages are deductible from your profits and use their allowance | Must be paid, at a commercial rate, through payroll if over the LEL |
| Make them a partner | Profits are split, using two sets of allowances and bands | Both share liability; need a partnership agreement |
| Marriage Allowance | Transfers £1,260 of allowance to a basic-rate spouse | Not available if either is a higher-rate taxpayer |
| Spouse pension contributions | The business can pay into their pension as part of their pay | Must be reasonable for their role |
| Transfer savings or assets | Income taxed at their lower rate | Must be an outright gift |
Employing your spouse
If your spouse does genuine work, such as bookkeeping, admin or answering calls, you can pay them a salary. For 2026/27, paying them between £6,708 (the Lower Earnings Limit) and £12,570 can give them a State Pension qualifying year, with no employee NIC and little or no income tax. Employer NIC at 15% applies above £5,000, though the Employment Allowance can usually cover it. You must pay at least the minimum wage for hours worked, keep timesheets and pay the money into their own account.
Example
Hassan is a self-employed electrician with a £70,000 profit. His wife Amira does his bookings and accounts for 10 hours a week. He pays her £6,708 a year through payroll, just above the minimum wage for her hours. The small employer NIC bill of about £256 is covered by the Employment Allowance. His profit falls to £63,292, saving him tax at 40% and NIC at 2%, around £2,800. Amira has no tax or NIC to pay, but gets a qualifying year for her State Pension.
Taking on a partner
A partnership lets you share profits in any agreed ratio, but HMRC may challenge a split that doesn’t reflect each partner’s contribution, especially if one partner does very little. A partner has full liability for business debts, so consider this carefully.
Settlements rules
If you move income to your spouse without a genuine commercial arrangement, HMRC’s settlements rules can tax it back on you. Outright gifts of assets between spouses are usually safe.
Frequently asked questions
Can I pay my spouse in cash?
Better through a bank account, with payslips.
Do I need a payroll if I pay under the LEL?
Not always, but keep records.
Can my spouse be paid for unpaid help in past years?
No, wages must be paid when the work is done.
Does a partnership need registering?
Yes, with HMRC.
Related: employing family members, claiming Marriage Allowance and Form 17 for joint income.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with tax planning for sole traders and spouses. See our sole trader accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
