Last updated: 14 October 2026
Can you employ your spouse, partner or family members in your business?
Yes, and it can save tax, as long as they do real work and you pay them a rate that’s reasonable for that work. Their wages are an allowable business expense, and they can use their own Personal Allowance of £12,570 and lower tax bands. But payments must actually be made, recorded through payroll where required, and comply with minimum wage law. HMRC will challenge wages that are too high for the work done, or paid to family members who don’t really work in the business.
What makes a family wage deductible
| Requirement | Why it matters |
| Genuine work | Duties such as bookkeeping, admin, answering calls, cleaning or marketing |
| Reasonable pay | Similar to what you’d pay an unrelated person for the same work |
| Actually paid | Into their own bank account, not left in yours |
| Records | Timesheets, job description and payslips |
| Payroll and minimum wage | PAYE if above the Lower Earnings Limit, and National Minimum Wage rules |
National Minimum Wage
From April 2026, the National Living Wage is £12.71 an hour for workers aged 21 and over. Family members who live in the family home and work in a family business are exempt from minimum wage rules, but spouses who don’t live with you, and other relatives, aren’t.
Example
Darren, a self-employed electrician, pays his wife £6,500 a year to do his invoicing, bookings and bookkeeping for about 8 hours a week. She has no other income. Darren deducts £6,500 from his profits, saving 40% tax and 2% Class 4 NIC: £2,730. His wife pays no tax, as it’s within her Personal Allowance, and no NIC, as it’s below the threshold. Paid above the Lower Earnings Limit of £129 a week, she also builds State Pension entitlement.
Children
- Children under 13 can’t usually be employed, with some exceptions
- Children aged 13 to 16 have limits on hours, and local authority rules may require a permit
- From 16, they can be paid normally, and a pension contribution can be made
Pension contributions
You can pay pension contributions for a family employee. Employer contributions are deductible if the total remuneration package is reasonable for the work done.
Limited companies
Companies can employ family members in the same way. Salary must be justified by the work, and appropriate employer NIC applies above £5,000 a year, though the Employment Allowance can cover it if there are other employees.
Alternatives
- Taking your spouse into partnership to share profits
- Giving shares in your company for dividends (beware the settlements rules)
- Transferring income-producing assets to a lower-earning spouse
Common mistakes
- Paying a round sum with no record of work
- Paying more than the market rate
- Not running payroll when required
Frequently asked questions
Do I have to run payroll for my spouse?
If they’re paid above the Lower Earnings Limit, or have other jobs, yes.
Can I pay my child pocket money as wages?
Only if they do genuine work for the business.
Can my spouse be paid in cash?
Better paid into their own account with records.
Can I pay them a bonus?
Yes, if justified by the work.
Related: can employing a family member save tax, sole trader tax planning with a spouse and a minor as a shareholder.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with employing family members. 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.
