Paying a spouse through your business is one of the most commonly discussed tax planning strategies among UK business owners. When structured correctly, it can be both commercially sensible and tax efficient.
However, it is also an area where misconceptions are common, and getting the detail wrong can quickly lead to HMRC challenging your spouse’s role within the company.
In this article, we discuss whether you can legally pay your spouse through your company, how much you should be paying them, the potential tax advantages, and how pension contributions can enhance the strategy.
Can I legally pay my spouse an income through my company?
Yes, you are able to pay your spouse an income from your company, provided it is done in compliance with HMRC guidelines.
Employing your spouse or civil partner is entirely legitimate, but it must reflect a genuine commercial arrangement.
That role may include:
- Administrative support.
- Bookkeeping or finance tasks.
- Marketing or social media management.
- Client communication or operations.
The key is that their work is real, necessary, and proportionate to the salary they receive.
From a compliance perspective, you should:
- Register as an employer with HMRC.
- Operate PAYE correctly.
- Provide a formal contract of employment.
- Maintain records of duties, hours, and pay.
How much should I pay my spouse?
There is no fixed figure for how much your spouse should be paid. However, any pay should always reflect the work being carried out and should be at a rate that you would normally expect to pay a third party for the same role.
National Minimum Wage
One area that is often misunderstood is the National Minimum Wage (£12.71 per hour for those aged 21 and above in 2026/27).
In most standard company structures, spouses who are employees are still entitled to the National Minimum Wage. The “family member exemption” is narrow and does not commonly apply in practice for incorporated companies (a business that has been legally registered as a separate legal entity, distinct from its owners).
Business owners tend to look to balance:
- Commercial justification (what the role is worth).
- Tax efficiency (how allowances and thresholds are used).
Using a salary
A commonly used starting point when paying a spouse a salary is the Personal Allowance (£12,570), as this is the level at which no Income Tax or personal National Insurance is typically due.
However, the “right” salary is not always as simple as matching this figure.
In practice, business owners often consider a combination of:
- Income Tax thresholds: Keeping income within lower tax bands where feasible.
- National Insurance thresholds: Thresholds can apply differently to salary compared to dividends.
- The company’s position: Profit levels and the potential to reduce Corporation Tax.
- The role being carried out: Ensuring the spouse’s salary and role are commercially justifiable.
For example, you may choose to:
- Pay a salary up to the Personal Allowance to make use of tax-free income.
- Adjust slightly above or below this level depending on National Insurance considerations.
- Combine a lower salary with dividends to create a more balanced overall income if the spouse is also a shareholder.
Due to this, a salary is often not looked at in isolation, but as part of a wider approach to how income is taken from the business.
Using dividends
Alternatively, some business owners consider paying their spouse through dividends, where appropriate.
Dividends are payments made to shareholders from company profits after Corporation Tax has been paid. This means your spouse would need to be a shareholder in the business to receive them.
Each individual has an annual dividend allowance of £500, which allows them to receive this amount of dividend income each year tax-free.
Any dividends above this amount are taxed at rates linked to Income Tax bands:
- 10.75% for basic rate taxpayers.
- 35.75% for higher rate taxpayers.
- 39.35% for additional rate taxpayers.
Are there tax advantages to paying my spouse a salary or dividends?
Both salary and dividends can play a role in how income is structured, but they work in different ways from a tax perspective.
Tax advantages of paying your spouse a salary
Any salary paid by the company is treated as an allowable business expense, as it is incurred wholly and exclusively for the purpose of running the business.
This means that salaries can be deducted from the company’s profits before Corporation Tax is calculated, which may reduce the overall Corporation Tax liability.
For example:
- A company generates £300,000 in profit.
- It pays £100,000 in salaries.
- Its taxable profit is reduced to £200,000.
This lower profit figure is then used to calculate the Corporation Tax due.
The amount of Corporation Tax payable will depend on how much profit remains after allowable business expenses have been applied.
For 2026/27, rates are as follows:
- Profits of £50,000 or less are typically taxed at 19% (small profits rate).
- Profits above £250,000 are typically taxed at 25% (main rate).
- Profits between these thresholds are subject to marginal relief, which gradually increases the effective rate from 19% to 25%.
Because of this structure, reducing taxable profits through allowable expenses, such as salaries, may help lower the amount of Corporation Tax payable. A salary may also provide a more predictable source of income than dividend payments, which can vary depending on company profitability.
Employer’s National Insurance Allowance
For a director only payroll, any payments made to a director more than the £5,000 national insurance threshold are subject to employer national insurance of 15%. If a spouse is employed, the company can then claim an employer allowance on national insurance which means the first £10,500 of national insurance does not need to be paid.
This results in a director and spouse being able to draw a salary of £12,570 each without any personal tax or national insurance implications, and the company has no national insurance liability.
Tax advantages of paying your spouse through dividends
Dividends are not treated as an allowable business expense, as they are paid from profits after Corporation Tax has already been applied. This means dividends cannot reduce the company’s taxable profit or its Corporation Tax liability (unlike a salary).
However, dividend tax rates are currently considerably lower than Income Tax rates:
| Tax Band | Dividend Tax Rate | Income Tax Rate |
| Basic Rate | 10.75% | 20% |
| Higher Rate | 35.75% | 40% |
| Additional Rate | 39.35% | 45% |
Additionally, dividends are not subject to National Insurance as they are not considered as “earnings” from employment. This applies to both the individual receiving the money and the company paying it out, which creates several practical advantages:
- No employee NICs: You do not pay the personal percentage that is typically deducted from a salary (currently 8% on earnings between £12,570 and £50,270, then 2% above that amount).
- No employer NICs: The company does not pay the extra employer contribution on top of the payment (currently 15% on earnings above £5,000).
Because of this, dividends are often considered when structuring income because their tax treatment differs from salary.
It is important however that dividends are not paid to a spouse with the sole intention of diverting taxable income from a higher rate of tax to a lower rate using a spouse’s own tax situation.
Key takeaway
Both salary and dividends offer tax-efficient benefits for both your spouse and company and can be used to spread income more efficiently between you.
In practice, this may involve:
- Using a salary to make use of the Personal Allowance, allowing income to be received with little or no Income Tax.
- Using dividends to take advantage of lower tax rates and the absence of National Insurance.
- Reducing reliance on a higher earner’s income, which may otherwise be taxed at higher or additional rates.
However, it is important to note that any salary paid to your spouse must reflect the genuine work carried out, and that dividend payments align with share ownership and company structure.
Should I set my spouse up with a pension through my company?
If your spouse is employed by the business, the company is able to make employer pension contributions on their behalf.
Depending on individual circumstances, employer pension contributions may provide a number of advantages, including:
- Contributions are typically allowable for Corporation Tax relief.
- Contributions are not subject to Income Tax or National Insurance.
- Funds grow in a tax-efficient pension wrapper.
For many business owners, pension contributions form a key part of longer-term wealth planning rather than just short-term tax efficiency.
How can Cooper Associates Wealth Management help?
UK tax rules and allowances are complex and subject to change. If you are a business owner considering paying your spouse an income or setting up a workplace pension, it is important to get the structure right.
Our financial advisers take the time to understand your personal circumstances and provide holistic advice tailored to your individual circumstances. We can help you understand your options, providing confidence and clarity that can help ensure any business decisions are informed and aligned with your wider financial plan.
To book a consultation with one of our expert advisers get in touch today and discover how we can help you reach your financial goals.
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The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
