Paying your children for working in your business

You can pay your son or daughter from your business, but only if their pay is reasonable for the work that they do for the business. Don’t fall into the trap of paying over the odds for office assistance just because the worker is your relative.

Tax inspectors tend to be suspicious of amounts paid to the owner’s offspring, so you need to retain some supporting evidence of the work done. This is particularly important if the work is not performed at your business premises. In that case, ask the worker to complete a regular time sheet and pay only for the recorded hours. Alternatively, pay according to the output delivered, such as for every leaflet designed, or each customer query answered.

Where the pay amounts to more than £116 per week, you must put this through the payroll and subject it to PAYE, just as you would for any other employee.

There are rules on how many hours a child aged under 16 is legally allowed to work during school term time, and during the school holidays. Search for ‘child employment’ on gov.uk for the rules relating to your industry.