How to pay your spouse and children through your business (2026/27)
You can pay your spouse or children through your business if they do genuine work at a commercial rate. In 2026/27 a salary up to £12,570 carries no income tax for someone with no other income, and an outright gift of ordinary shares lets your spouse receive dividends at their own rates. Children can usually work part-time from 14.
By George Nicholson BFP ACA, ICAEW Chartered Accountant · Last reviewed 20 October 2026
What are the key 2026/27 figures for paying family members?
Each figure links to its GOV.UK source.
| Figure | 2026/27 | Who it applies to |
|---|---|---|
| Personal Allowance | £12,570 | Everyone, including children |
| Employee National Insurance | 8% on pay between £12,570 and £50,270 | Employees aged 16 and over |
| Employer National Insurance | 15% on pay above £5,000 | Employers |
| Employer National Insurance for under-21s | 0% on pay up to £50,270 | Employees under 21 |
| Employment Allowance | Up to £10,500 off employer National Insurance | Eligible employers |
| Dividend allowance | £500 | Each shareholder |
| Dividend tax rates | 10.75% basic, 35.75% higher, 39.35% additional | Dividends above the allowance, UK-wide |
| Marriage Allowance | £1,260 transfer, worth up to £252 | Married couples and civil partners |
| Minimum wage from 1 April 2026 | £12.71 (21 and over), £10.85 (18 to 20), £8.00 (16 to 17) | Workers above school leaving age |
| Parental gift limit | £100 a year, per parent and per child | Gifts to children under 18 |
Can I pay my spouse a salary from my business?
Yes, if your spouse or civil partner does real work for the business, such as the books, calls or marketing, at a reasonable rate. HMRC allows a deduction only for a commercial reward for work genuinely done, and can disallow any excess (HMRC manual BIM47105).
For a spouse with no other income, a salary up to £12,570 carries no income tax and no employee National Insurance. The company pays employer National Insurance at 15% above £5,000, so a £12,570 salary costs £1,135.50 unless the Employment Allowance covers it (GOV.UK: rates for employers 2026 to 2027). Both are deductible for Corporation Tax if the pay is commercial. Our employer cost calculator shows the full cost of any salary. If you put your spouse on the payroll, our payroll service runs their pay through PAYE, issues payslips and reports each payment to HMRC on or before payday.
Pay of at least £6,708 a year, the Lower Earnings Limit, also builds State Pension qualifying years (GOV.UK: National Insurance rates). Sole traders can employ a spouse the same way, but cannot give shares.
Should I give my spouse shares in my company?
Often, yes. An outright gift of ordinary shares lets your spouse receive dividends at their own rates, so profit taxed at 35.75% in your hands can be taxed at 10.75% in theirs. Gifts between spouses and civil partners who live together carry no Capital Gains Tax (GOV.UK: gifts to your spouse).
The risk is the settlements rules, which can tax the income on you. A gift between spouses escapes them only if it is outright, carries the right to all the income and is not wholly or substantially a right to income (ITTOIA 2005 section 626). HMRC looks for:
- shares with only dividend rights, such as a class with no votes and no right to capital (TSEM4205)
- repeated dividend waivers, or waivers when reserves are too low to pay every share the same rate (TSEM4225)
- side arrangements that let the money come back to you
Ordinary shares with full rights, as in the Jones v Garnett (Arctic Systems) case, can fall outside the rules. Neither exemption covers unmarried partners or children.
What other ways can a couple share income?
If one of you earns under £12,570 and the other pays basic rate tax (in Scotland, the starter, basic or intermediate rate), Marriage Allowance transfers £1,260 of allowance, worth up to £252 a year. Savings help too: a basic rate taxpayer can earn £1,000 of interest tax-free, a higher rate taxpayer only £500 (GOV.UK: tax on savings interest).
Worked example: how much can paying your spouse save?
Your spouse has no other income and receives a £12,570 salary plus £37,700 of dividends on ordinary shares they own outright. You are a higher rate taxpayer and have not used your own £500 dividend allowance.
| Dividends of £37,700 | Paid to your spouse | Paid to you instead |
|---|---|---|
| Covered by the dividend allowance | £500 | £500 |
| Taxed dividends | £37,200 | £37,200 |
| Dividend tax rate | 10.75% | 35.75% |
| Dividend tax | £3,999 | £13,299 |
Your household saves £9,300 a year on the same profits. The salary uses your spouse's Personal Allowance, so their dividends sit in the basic rate band, which tops out at £50,270 in England, Wales and Northern Ireland. If your own dividend allowance is already used, your tax would be £13,478 and the saving £9,479. Against that, the company pays £1,135.50 of employer National Insurance on the salary unless the Employment Allowance applies.
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How do I pay my spouse or children? 2026/27
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Can I employ my children in my business?
Yes, for genuine work at a reasonable rate. The general minimum age for part-time work is 14. Some councils allow 13-year-olds to do light work under local byelaws, and most require a child employment permit (GOV.UK: child employment). Full-time work must wait until minimum school leaving age. Under GOV.UK's restrictions, school-age children can work:
- up to 12 hours a week in term time, with no more than 2 hours on school days and Sundays
- up to 25 hours a week in school holidays at 14, or 35 hours at 15 or 16
- never in school hours, before 7am or after 7pm, and with a 2-week break from work each year in the school holidays
Your child has their own £12,570 Personal Allowance. Under-16s pay no National Insurance, and school-age children are not entitled to the minimum wage (GOV.UK: paying children). From 16, employee National Insurance applies above £12,570, but employer National Insurance is 0% on pay up to £50,270 for under-21s. Keep timesheets and payslips, and pay into your child's own bank account.
Can I give shares to my children?
Not usefully while they are under 18. If a gift or arrangement you make produces more than £100 of income a year for your own unmarried child under 18, all of it is taxed as yours, not just the excess. The limit applies per parent and per child (HMRC manual TSEM4310).
From 18, dividends on their own shares use their own allowances, which can help with university costs. A gift of shares to a child is a disposal at market value for Capital Gains Tax.
Can employing a family member unlock the Employment Allowance?
Sometimes. The Employment Allowance takes up to £10,500 a year off employer National Insurance, but not for a company whose only director is the only employee liable for it (GOV.UK: Employment Allowance eligibility). Paying a second genuine employee, or a second director, at or above the £5,000 Secondary Threshold can make the company eligible (HMRC manual NIM06545), and the allowance can then cover employer National Insurance on both salaries. If that employee is under 21, their own employer National Insurance rate is 0%, so ask us to check eligibility before you rely on the allowance.
Do I have to pay family members the minimum wage?
If your limited company employs them, generally yes. The exemption for family members living in the employer's home does not apply to a company, which cannot have a family (HMRC manual NMWM05160). A spouse or child employed by the company is entitled to the minimum wage for their age unless they are below school leaving age, usually 16. Directors are entitled only if they also have a contract that makes them a worker, and dividends never count as pay. As a guide, £12,570 at the £12.71 National Living Wage covers about 19 hours a week over 52 weeks.
How do I make sure HMRC accepts the arrangement?
Four golden rules cover most of it:
- The work is real, and you can show what they do.
- The pay is reasonable for the job and the hours.
- The records are kept: timesheets, payslips, board minutes and share paperwork.
- The money is theirs, paid into their own bank account.
Our tax savings calculator estimates what your family could save, and our personal tax service covers family salaries, dividends and Marriage Allowance. Our payroll service keeps the payslips and HMRC reports for family members in order. For your own pay, read how to pay yourself as a director.
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Frequently asked questions
Can I pay my wife or husband a salary from my limited company?
Yes, if they do genuine work for the company at a reasonable commercial rate. In 2026/27 a salary up to £12,570 carries no income tax or employee National Insurance for a spouse with no other income. The company pays employer National Insurance at 15% on pay above £5,000 unless the Employment Allowance applies.
Can I put my spouse on the shares to save dividend tax?
Usually, yes. An outright gift of ordinary shares with full rights lets your spouse receive dividends taxed at their own rates, and a gift between spouses who live together carries no Capital Gains Tax. Shares with only dividend rights, or repeated dividend waivers, can bring in the settlements rules, so the dividends are taxed as yours.
How old does my child have to be to work in my business?
The general minimum age for part-time work is 14, and some councils allow 13-year-olds to do light work. Most councils require a child employment permit, and school-age children can work no more than 12 hours a week in term time. Full-time work must wait until minimum school leaving age.
Can I give shares to my children to use their allowances?
Not usefully while they are under 18. If a gift you make produces more than £100 of income a year for your own unmarried child under 18, all of it is taxed as yours. From 18, dividends on shares they own are taxed as their own income.
Do I have to pay my spouse or child the minimum wage?
If your limited company employs them, generally yes. The family-member exemption does not apply to a company, so a spouse or child is entitled to the minimum wage for their age, £12.71 an hour at 21 and over from 1 April 2026. Children below school leaving age, usually 16, are not entitled.
Written and reviewed by George Nicholson BFP ACA, ICAEW Chartered Accountant. Last reviewed 20 October 2026. This page is general information, not personal advice.
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