Pre-Budget Statement - Employing Family Members

Although, for 2010/11, there will be no change in the 'Earnings Threshold' (the point at which National Insurance contributions become payable by employers and employees), the 'Lower Earnings Limit' will rise from £95 to £97 a week. This is important because, where earnings fall between the Lower Earnings Limit and the Earnings Threshold, 'nil rate National Insurance contributions' apply - this apparent contradiction in terms means that no contributions are payable, by employee or employer, but the employee's contribution record is still franked for pension and benefit purposes. For 2010/11, the 'nil rate band' will run from the Lower Earnings Limit of £97 a week (£421 a month) to the Earnings Threshold of £110 a week (£476 a month).
Where family members work part-time in a family business, it is important to remember that worthwhile pension rights can be accrued, at no cost, by paying them a salary just over, rather than just under, the Lower Earnings Limit. Accordingly, if anyone is paid less than £97 a week, it may be very worthwhile to increase their wages from April.

February 2010