Can You Pay Your Spouse Through Your Limited Company?

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Last updated 23 October 2026. Written by the Limited Company Accountant UK team, part of Accotax. Figures are for the 2026/27 tax year; always check GOV.UK for the latest rates.

Short answer: Yes, your company can pay a spouse or civil partner a salary or dividends, but the pay must reflect genuine work at a market rate, and dividends only work if they own real shares. Done properly it can use a second personal allowance and basic rate band, but HMRC challenges arrangements that are artificial.

Key facts

Salary rule	Must be for genuine work at a fair rate
Minimum wage	Applies once they are an employee
Second personal allowance	£12,570
Dividend rule	Shares must carry real rights
Settlements risk	Applies where income is ‘diverted’

Why people ask

The idea is simple. If one spouse earns a lot and the other earns little, shifting some of the company’s income to the lower earner can use their personal allowance and basic rate tax bands. Two people each paying 20% or 10.75% pay less tax overall than one person paying 40% or 35.75% on the top slice.

Because this idea is so well known, HMRC pays close attention to it, and the rules around it are strict. You can do it legitimately, but you need to follow the conditions rather than simply writing a spouse onto the payroll.

Paying a salary to a spouse

A salary is allowed if your spouse genuinely works for the company and the pay is reasonable for the work they do. Good examples are bookkeeping, administration, customer service, social media or handling the post and calls. The pay should match what you would pay an unrelated person for the same hours.

If they are an employee they must receive at least the National Minimum Wage or National Living Wage for the hours they work, and they should have a contract and appear on the payroll. The company should keep timesheets or records showing the work done. A payment that is not matched by real duties is not deductible and can be treated as a disguised gift or dividend.

For payroll, the company deducts PAYE and National Insurance in the normal way. If the salary is above £5,000 the company pays employer National Insurance, unless the Employment Allowance applies, and having a second employee on the payroll may make the allowance available to the company.

Sharing dividends with a spouse

A second option is to give your spouse shares in the company so that dividends are paid to them. The shares must be real, with voting, dividend and capital rights that match the proportion. A gift of shares between spouses is generally treated as a transfer with no gain or loss for capital gains tax, so it is straightforward in principle.

The danger is the settlements legislation. HMRC can tax the dividends as yours if the arrangement amounts to a settlement, which happens where you keep control of the money or the shares are a bare gift with strings attached. The rules typically do not apply where the shares are an outright gift of ordinary shares that carry full rights, and the spouse really owns and controls the dividend income.

There is a further trap. If the shares are alphabet shares with different dividend rights, the company must still have enough profit, and the dividends should reflect the shareholding unless the articles allow otherwise.

Salary versus dividends for a spouse

For a spouse with little or no other income, both a salary and dividends can use the personal allowance. A salary of £12,570 would be covered by the allowance, but the company must still pay employer NI above £5,000 unless the Employment Allowance applies. Dividends, by comparison, avoid National Insurance but require shares and a clear paper trail.

A common compromise is a small salary at or around the lower earnings limit of £6,708 for genuine work, plus dividends from a modest shareholding. This keeps National Insurance low while building the spouse’s State Pension record.

Records HMRC expects to see

If HMRC opens an enquiry, you will be asked to prove the arrangement is genuine. Prepare the following before the question arises.

• A written employment contract or job description for the spouse.

• Evidence of the work done, such as emails, timesheets and invoices they processed.

• Payroll records showing PAYE reporting and payslips.

• A share certificate, board minutes and dividend vouchers for dividend payments.

• Bank statements showing payments reaching the spouse’s own account, not a shared account you control.

When it is not worth it

Paying a spouse does not make sense when the work is minimal, when it would push the spouse into higher rate tax, or when family dynamics make the shareholding risky. If you divorce, a spouse who owns shares has a legal claim to them, and the company’s ownership could become complicated.

Because the tax saving is often a few thousand pounds a year, it is worth doing only when the arrangement is sound. A qualified accountant can model the saving and confirm the paperwork before you commit.

A numerical example

Suppose your company profit is £90,000 and you already use your higher rate band. If you take a £30,000 dividend yourself, part of it falls in the higher band at 35.75%. If your spouse owns half the shares and has no other income, the same £30,000 dividend, split equally, would give £15,000 each. For your spouse, £12,570 of the allowance combined with a £500 dividend allowance means most of their share is taxed at 0% or 10.75%.

On these figures the combined tax can drop by several thousand pounds a year. It is exactly this kind of saving that attracts HMRC’s attention, so the share ownership must be real, the dividends must go to your spouse’s own account, and the paperwork must be complete.

Practical steps to set it up properly

If you decide to proceed, work through a sensible checklist.

1. Agree the role your spouse will perform and the hours, then document it in a short contract.

2. Register them on payroll and run PAYE every month, even if no tax is due.

3. If using shares, issue ordinary shares with full rights through a proper share allotment and file the change at Companies House.

4. Declare dividends at a board meeting and issue vouchers for each shareholder.

5. Review the arrangement every year, because tax rates and your income will change.

Frequently asked questions

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