Can I pay my spouse a salary from my contractor company?

Yes, where they genuinely work for the company and the pay reflects that work at a commercial rate. The salary is then a deductible expense against corporation tax and runs through PAYE like any other. What HMRC challenges is pay for no work, or pay far above what the same duties would cost from an unconnected person. The test is not whether the person is your spouse, it is whether the company received something for the money. Bookkeeping, invoicing, credit control, scheduling and company administration are all real work if they are actually done.

How much does a spouse salary of £12,570 actually save in 2026/27?

On that slice of profit, roughly £6,000 for a higher-rate director whose spouse has no other income. Paid as salary, the company deducts £12,570, the Employment Allowance covers the employer National Insurance on it, and the spouse pays no income tax (personal allowance £12,570) and no employee National Insurance (primary threshold £12,570). Left in the company and paid to you as a dividend instead, the same £12,570 bears corporation tax at 19% and then dividend tax at 35.75%, leaving about £6,542. The gap is an unused personal allowance being used, not a trick.

Does putting my spouse on the payroll unlock the Employment Allowance?

Usually yes, and that is often worth more than the salary decision itself. The Employment Allowance is £10,500 for 2026/27 and offsets employer secondary Class 1 National Insurance, but it is not available to a company whose only employee is a single director. Adding a second genuinely employed person paid above the £5,000 secondary threshold normally removes that restriction. Once the company can claim it, the director's own salary answer often moves from the £6,708 lower earnings limit up to £12,570, because the employer National Insurance on the extra salary is relieved.

Is there a capital gains tax charge when I transfer shares to my spouse?

No, where you are married or in a civil partnership and living together. TCGA 1992 s.58 treats the transfer as made for a consideration giving neither a gain nor a loss, so no capital gains tax arises at that point. Your spouse inherits your base cost, which matters later if the company is sold or wound up, because their gain is measured from your original cost and not from the value on the day of the transfer. Separating couples keep the same treatment only for a limited window.

Should I use salary, shares, or both?

Most contractor households that qualify for both use both, in that order. Salary comes first because it is deductible against corporation tax, uses the personal allowance and secures a qualifying National Insurance year for a spouse who might otherwise have a gap. Shares come second, because dividends are paid from profit that has already borne corporation tax, so they only move the personal tax rate. The order reverses only where the spouse does no work for the company, in which case the salary route is not available at all.

Limited Company Tax

Putting Your Spouse on the Payroll or the Share Register

27 September 2026Contractor Tax Accountants Editorial Team5 min read

Two routes exist for bringing a spouse into your contractor company, and they are taxed differently. A salary for real work is deductible, worth around £6,000 of household tax on £12,570 of profit, and can unlock the £10,500 Employment Allowance. Shares instead move dividends onto a second set of bands. Most contractor households end up using both.

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Figures checked against primary sources (HMRC, legislation.gov.uk, HMRC IR35 guidance) in 27 September 2026.

Key takeaways

A spouse salary of £12,570 for genuine work leaves the household roughly £6,000 better off on that slice of profit than paying the same money as a higher-rate dividend to you, because salary is deductible and their personal allowance is otherwise wasted, and where the company can claim the Employment Allowance against the employer National Insurance.
A second employee paid above the £5,000 secondary threshold usually unlocks the £10,500 Employment Allowance, which a single-director company cannot claim, and that changes your own salary answer too.
Gifting genuine ordinary shares to a spouse falls inside the outright-gift exception to the settlements rules in ITTOIA 2005 s.626, confirmed in Jones v Garnett, and the transfer itself is no gain no loss under TCGA 1992 s.58.
The salary route fails on evidence (no real work, or pay above a commercial rate) and the share route fails on substance (a restricted, dividend-only share carrying no real rights).
The two routes are not alternatives for most contractor households: salary first up to the personal allowance, then dividends on genuine shares.

A black coffee mug on an office desk with a blurred laptop in the background. — Photo: Pavel Danilyuk / Pexels

You have two routes, and they are taxed differently. Paying a spouse a salary of £12,570 for genuine work leaves a household roughly £6,000 better off on that slice of profit than paying the same money to a higher-rate director as a dividend, and it usually unlocks the £10,500 Employment Allowance as a second prize. Giving a spouse genuine ordinary shares saves nothing inside the company, but it moves dividends onto a second personal allowance and a second basic-rate band, worth about £4,670 on the first £13,070 of dividends, being their £12,570 personal allowance and the £500 dividend allowance, where the spouse has no other income. The routes are not rivals. Salary needs real work, shares need real ownership, and most households that qualify use both.

What does a spouse salary actually save in 2026/27?

About £6,000 on £12,570 of profit, where the spouse has no other income, the company can claim the Employment Allowance and you are a higher-rate taxpayer. Paid as salary, the company deducts the £12,570 from its profit, the spouse pays no income tax because the personal allowance is £12,570, and no employee National Insurance because the primary threshold is also £12,570. The household keeps £12,570. Left in the company and drawn by you instead, that £12,570 bears corporation tax at 19%, leaving £10,182, then dividend tax at the upper rate of 35.75%, leaving £6,542. The difference is £6,028, and it widens to roughly £6,630 where the company sits in the marginal relief band at about 26.5%. The saving is an unused personal allowance plus a deduction a dividend never attracts, so it shrinks as the spouse's own income grows.

Does a second person on the payroll unlock the Employment Allowance?

Usually, and it is often worth more than the salary decision itself. The Employment Allowance is £10,500 for 2026/27 and offsets the company's secondary Class 1 National Insurance, but it is not available where the only employee is a single director. Put a second genuinely employed person on the payroll above the £5,000 secondary threshold and the restriction normally falls away.

The knock-on matters. Without the allowance, employer National Insurance at 15% above £5,000 is a real cost, so a single director often stops at the lower earnings limit of £6,708, enough for a qualifying National Insurance year. With the allowance relieving the employer National Insurance on a higher salary, £12,570 usually becomes the better number for the director too, as our director salary and dividend split guide sets out.

What does HMRC expect to see for a spouse salary?

Evidence that the company got something for its money: a defined role you can describe in a sentence, a rate you could defend by pointing at what an unconnected person doing the same hours would charge, and the ordinary trail of an employment, meaning a PAYE record, payslips and real payments leaving the company account into the spouse's own. Bookkeeping, invoicing and credit control, scheduling, bid administration and company secretarial work are all genuine functions in a contractor company.

Two failures recur. Pay for no work is not deductible, so the company loses the relief while the spouse is still taxed on what they received. A rate you could not defend commercially raises the same problem: £20,000 for two hours a week of filing invites the question of what the company bought.

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Are shares gifted to a spouse caught by the settlements rules?

Not where they are an outright gift of genuine ordinary shares. The settlements legislation at ITTOIA 2005 s.624 can tax income back on the person who really provided it. Section 626 then lifts out an outright gift between spouses or civil partners, on two conditions: the whole of the income has to pass with the gift, and what is given must not be wholly or substantially a right to income. Ordinary shares carrying votes, a share of capital on a winding up and the real risk that no dividend is ever declared sit inside that exception. That is the point Jones v Garnett [2007] UKHL 35 settled.

The exception has edges. A share engineered to carry a dividend entitlement and nothing else looks like a right to income, which is the usual way the s.626 exception is lost, and the same goes for a gift you can unwind or whose proceeds can return to you. Separate share classes carry their own conditions, covered in our note on alphabet shares. Whatever the class, the shares must be genuinely transferred, entered in the register of members and picked up on the next confirmation statement, with dividends declared properly and paid into the spouse's own account.

Is there a tax charge on transferring the shares?

No capital gains tax at the point of transfer, where you are married or in a civil partnership and living together. TCGA 1992 s.58 treats the disposal as made for a consideration producing neither a gain nor a loss. Your spouse takes over your base cost, not the value on the day, which matters on a later sale. Separated couples keep the treatment only for a limited window. If you both run companies, check the associated companies rules too, which divide the £50,000 and £250,000 limits and can push both into marginal relief.

Salary, shares, or both?

Route	What it needs	What it saves in 2026/27	Where it fails
Salary only	Real work at a commercial rate, PAYE, payment into their own account	About £6,000 on a £12,570 salary against a 35.75% dividend, plus the £10,500 Employment Allowance and a qualifying NI year	No work done, or pay above a defensible rate
Shares only	Outright gift of genuine ordinary shares, register updated, dividends declared properly	About £4,670 on the first £13,070 of dividends, then 25 points of rate difference up to £50,270	A dividend-only or revocable share, so the income comes back to you
Both	Both of the above, evidenced separately	The salary saving, then dividends at 10.75% rather than 35.75% up to the spouse's £50,270	One set of paperwork treated as covering two separate tests

Both, in that order, for a household that qualifies for both. The order flips only where the spouse does no work for the company.

What changes once the spouse has their own income?

Most of the arithmetic. A spouse already earning £40,000 elsewhere has no spare personal allowance, so a salary from your company is taxed at 20%, carries employee National Insurance at 8% and costs the company 15% above £5,000. Dividends to that spouse fall at 10.75% only until their total income reaches £50,270, after which they are at 35.75% like you. Run the household numbers on the current dividend rates, not the 8.75% and 33.75% that applied before 6 April 2026.

Test both against the lever that often beats them. An employer pension contribution from the company is deductible, carries no National Insurance and is not capped by anyone's salary, so for a household that does not need the cash this year it can do more than any split between two people. The working pattern, the household income and the share structure decide each other, so settle all three in one sitting rather than one at a time.

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Frequently asked questions

Can I pay my spouse a salary from my contractor company?: Yes, where they genuinely work for the company and the pay reflects that work at a commercial rate. The salary is then a deductible expense against corporation tax and runs through PAYE like any other. What HMRC challenges is pay for no work, or pay far above what the same duties would cost from an unconnected person. The test is not whether the person is your spouse, it is whether the company received something for the money. Bookkeeping, invoicing, credit control, scheduling and company administration are all real work if they are actually done.
How much does a spouse salary of £12,570 actually save in 2026/27?: On that slice of profit, roughly £6,000 for a higher-rate director whose spouse has no other income. Paid as salary, the company deducts £12,570, the Employment Allowance covers the employer National Insurance on it, and the spouse pays no income tax (personal allowance £12,570) and no employee National Insurance (primary threshold £12,570). Left in the company and paid to you as a dividend instead, the same £12,570 bears corporation tax at 19% and then dividend tax at 35.75%, leaving about £6,542. The gap is an unused personal allowance being used, not a trick.
Does putting my spouse on the payroll unlock the Employment Allowance?: Usually yes, and that is often worth more than the salary decision itself. The Employment Allowance is £10,500 for 2026/27 and offsets employer secondary Class 1 National Insurance, but it is not available to a company whose only employee is a single director. Adding a second genuinely employed person paid above the £5,000 secondary threshold normally removes that restriction. Once the company can claim it, the director's own salary answer often moves from the £6,708 lower earnings limit up to £12,570, because the employer National Insurance on the extra salary is relieved.
Will HMRC treat shares gifted to my spouse as a settlement?: Not where the gift is an outright gift of genuine ordinary shares. The settlements legislation in ITTOIA 2005 s.624 can tax income back on the person who provided it, but s.626 lifts an outright gift between spouses or civil partners back out of it. Two conditions attach. The whole of the income has to pass with the gift, and what is given must not be wholly or substantially a right to income. Ordinary shares carrying votes, capital rights and the genuine risk of no dividend meet that description, which is what Jones v Garnett settled. A share stripped back to a dividend entitlement does not.
Is there a capital gains tax charge when I transfer shares to my spouse?: No, where you are married or in a civil partnership and living together. TCGA 1992 s.58 treats the transfer as made for a consideration giving neither a gain nor a loss, so no capital gains tax arises at that point. Your spouse inherits your base cost, which matters later if the company is sold or wound up, because their gain is measured from your original cost and not from the value on the day of the transfer. Separating couples keep the same treatment only for a limited window.
Should I use salary, shares, or both?: Most contractor households that qualify for both use both, in that order. Salary comes first because it is deductible against corporation tax, uses the personal allowance and secures a qualifying National Insurance year for a spouse who might otherwise have a gap. Shares come second, because dividends are paid from profit that has already borne corporation tax, so they only move the personal tax rate. The order reverses only where the spouse does no work for the company, in which case the salary route is not available at all.