Can I employ someone and claim their wages as a business expense?

Yes — if you hire employees, their wages, salaries, and associated costs are fully allowable business expenses. This includes: gross wages, employer's National Insurance contributions (currently 13.8% on earnings above £9,100), pension contributions you make for them, and any bonus payments. As an employer, you must set up PAYE, register with HMRC, and operate a payroll scheme. You deduct Income Tax and Employee NI from wages and pay them to HMRC along with Employer NI. If you pay your spouse or family member, HMRC may challenge this if the salary is not commercially reasonable for the work done — it must reflect the fair market value of the role. Claim wages under 'Employee costs' on your SA103F return.

  • Gross wages, employer NI (13.8%), and employer pension contributions: all deductible
  • Must register as an employer and operate PAYE via payroll software
  • Family member wages: must be commercially justifiable — HMRC scrutinises these
  • Employment allowance may reduce your employer NI bill by up to £5,000/year
  • Claim under 'Employee costs' on SA103F

Related Questions

  • Can I claim payments to subcontractors and freelancers as a business expense?
  • Do sole traders still pay Class 2 National Insurance in 2024/25?
  • Can I claim my accountant's fees as a business expense?