March 5th, 2013My children are costing me a fortune in pocket money. Can I pay them through my business?
Paying your children through your business would allow you to get tax relief on the payment you make to them – saving you money. Children are subject to income tax, just like everyone else, but they do have a personal allowance of £8,105 before any tax is payable. There are a few things to consider though:-
- You must actually pay the money. It’s not enough to just make a book entry.
- The amount you pay must be appropriate for the work done. Don’t be tempted to pay £50 per hour for a bit of filing! You’d also need to be happy that your child has the skills necessary for the work they are doing.
- There are rules as to the amount of time and type of work children can do. The rules are operated by local authorities so you’ll need to check. As a general rule employing a child aged 13 or over to do some light office work for 2-3 hours a week won’t cause a problem.
- Don’t cheat! A tax inspector will soon see through your efforts to get a tax deduction when one isn’t due.
