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Sam, Accountant
Category: UK Tax
Satisfied Customers: 13945
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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I work as an IT Contractor through my own Limited Company. I

Customer Question

I work as an IT Contractor through my own Limited Company. I am the sole director but have employed my wife for 3 years with a basic salary (£600 per month) to undertake admin/secretary duties. She holds 20% of the shares in the Limited Company, with myself holding the other 80%. I am considering accepting a permanent role and would therefore be closing the Limited Company. As director, I would make the decision to make my wife redundant as part of the process. There are sufficient funds in the business (after allowances for Corporation Tax etc) to pay mandatory redundancy rates, and also enough to pay additional redundancy payments to £25,000. Is there anything stopping me paying this additional redundancy payment to my wife?
Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam replied 1 year ago.


Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

No there is nothing stopping you but due to the excessive amount - and reasons for the payment then it will be liable to tax on your wife. The statutory redundancy amount as long as less than £30,000 (which I imagine it will very much so below this limit) can be paid tax free

Let me know if I can assist further



Expert:  Sam replied 1 year ago.

If however if you have all that you need - then it would be appreciated if you could rate for the level of service provided (or click accept)



Customer: replied 1 year ago.
Thank you for the reply. To clarify, are you saying the STATUTORY redundancy would be tax-free, but tax would be due on all additional redundancy payments? The total redundancy payment the company could afford to pay (statutory and additional) would be no more than £25,000 but if my wife would face considerable tax on the additional redundancy payment, I don't see value in offering this to her. I seek to clarify if it is just statutory payments that are tax-free and what constitutes 'excessive' additional redundancy payments. Regards.