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Employing family members and settlements legislation

By Chris Thorpe, March 2021

Chris Thorpe looks at issues of involving members of the family in the business and the potential minefields. 

In February 2012’s edition of Tax Insider, Sarah Laing wrote an article about employing family members i.e. putting their wages through the books and claiming the tax deduction. The upshot of the article was that provided they are working as genuine employees, such that the expense is wholly and exclusively for business purposes, then it is perfectly acceptable. Indeed, within a family-run business there is often little option, but it allows more tax-deductible money to stay within the family.  

Sarah did touch upon one tax planning idea for limited companies which takes the notion a little further – instead of (or in addition to) paying family members a salary, give them some shares and allow them to take dividends. Everyone has a £2,000 dividend allowance, they attract no NICs and dividends

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