Employing Family and Staff in Your Limited Company
Updated 21 October 2026 · 4 tips · LimitedCompany.Accountants, part of ACCOTAX
Employing people brings tax opportunities and compliance traps. These four tips cover both.
Key points
Let our payroll team run your PAYE and family salaries correctly from month one.
1. Employ family members who genuinely work in the business
Paying a spouse, civil partner or adult child who works in the company uses their personal allowance instead of wasting it. With the Employment Allowance available, salaries of £12,570 each are free of tax and all National Insurance. Example: paying a spouse and two adult children £12,570 each moves £37,710 out of the company tax-free. Paid instead to a higher-rate director as extra salary, the same sum would cost over £15,000 in income tax alone. Pay must match the work done, or HMRC can disallow it.
2. Pay at least the minimum wage
From 1 April 2026 the National Living Wage is £12.71 an hour for workers aged 21 and over, £10.85 for 18–20s and £8.00 for under-18s above school leaving age. Dividends do not count towards it. A £12,570 salary covers about 20.6 hours a week at the National Living Wage over 48 weeks. Directors without an employment contract are outside minimum wage rules, so appointing a family member aged 16 or over as a director avoids the issue.
3. Pay PAYE and file RTI returns on time
PAYE must reach HMRC by the 22nd of the following month if paid electronically, or the 19th by cheque; pay earlier if the date falls on a weekend or bank holiday. Submit a Full Payment Submission on or before each payday, and an Employer Payment Summary for months with no pay. Late payments on more than one occasion in a tax year, and late RTI filings after the first month, trigger penalties charged quarterly, plus interest. HMRC's three-day filing leeway is a concession, not a deadline.
4. Use salary sacrifice for the benefits that still work
Most salary sacrifice arrangements lost their advantage when the "optional remuneration" rules arrived: the benefit is now taxed on the salary given up. A few benefits still escape those rules: employer pension contributions, pension advice, cycle-to-work schemes, workplace nurseries, cars emitting 75g/km CO2 or less, and childcare vouchers for employees in a scheme before 4 October 2018. Pension sacrifice is the big one: on £5,000 sacrificed, the employee saves £400 of NIC and the employer £750. From 6 April 2029 the NIC saving will be capped at £2,000 a year per employee, so make the most of it now.
Frequently asked questions
Can I pay my children through my limited company?
Yes, if they do real work and are paid a rate that matches it, at least the minimum wage for their age unless they are directors without a contract.
When is PAYE due?
By the 22nd of the following tax month electronically, or the 19th by cheque.
Let our payroll team run your PAYE and family salaries correctly from month one.
Related reading
Figures apply to the 2026/27 tax year and are for general guidance only. Speak to a qualified accountant before acting.