National insurance

For a family business it is generally worthwhile paying wages to a spouse of between the employee lower earnings limit (£112) and the employee threshold (£155) per week. At this level of earnings no NIC will be due. The spouse will still accrue entitlement to a state pension and certain other state benefits.

Tip

A PAYE scheme would be needed to record the employee's entitlement to benefits and the wages.

For the self-employed there is a requirement to pay a flat rate contribution (Class 2). If your profits are low ie £5,965 you will be exempt but you will have the option to pay Class 2 NIC voluntarily at the end of the year. As the contributions are only £2.80 a week it may be advisable to pay the contributions in order to maintain a contributions record. The alternative voluntary Class 3 contributions are £14.10 a week!

Tax Planning

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