Employing your children in a Ltd company

8 months, 3 weeks ago by Oliver Atkinson

Employing your children in a Ltd company

Taking on your children as employees can be a great idea in principle – whether it’s to keep them occupied and out of trouble during the holidays or to provide them with real workplace experience whilst earning some money for themselves, there are plenty of good reasons to offer them some work. There is also the added benefit to your business through having an extra salary onto the books which can help to reduce your corporation tax bill at the end of
the year. In practice however, there are a few things you will need to bear in mind before you take them on.

How much can they work?

There are statutory limits on how often children can work depending on their age and the time of year. The legal minimum age for standard employment is 13 years old, at which point children are permitted to enter part time work.

During term time children can work as follows:

• A maximum 12 hours per week
• No more than 2 hours per day from Sunday to Friday
• No more than 5 hours on Saturdays for 13 to 14-year-olds, or 8 hours for 15 to 16-year-olds

And during the holidays:

• For 13 to 14-year-olds, a maximum 25 hours per week, restricted to 5 hours per day from Monday to Saturday and no more than 2 hours on a Sunday
• For 15 to 16-year-olds, a maximum 35 hours per week, restricted to 8 hours per day from Monday to Saturday and no more than 2 hours on a Sunday

Once your child hits 17 years old, the rules are relaxed quite a bit, and they may now work up to 40 hours a week, but still no more than 8 hours per day. Working hours must not cross into school hours and employment should not interfere with their school life.

Like any regular employee, children have to actually perform a role in the business and their remuneration should be realistic, reflecting the work that they do. HMRC have previously disallowed salaries paid to children that they felt were excessive for the work they performed, or if the remuneration was simply disguised monies paid to the directors with their children not actually working, resulting in an extra tax charge for the directors. For instance, paying your child the full personal allowance for the year when they are only permitted to work 12 hours a week could certainly raise a red flag.

There are plenty of roles children can perform rather than being consigned to simply answering telephones or helping out with simple admin tasks, so try to utilize their skills! Whether they might be good with web design or experienced with running social media accounts, or if they want to try following their parents into a trade - it doesn’t have to be something that they don’t like doing!

There of course some restrictions on what jobs are available to children, which you can read about here, but there is a wide range of possible job roles that fall outside of these restrictions to consider.

How much should I pay them?

As mentioned above, you should ensure children are paid fairly in relation to their job role. Until the age of 16, there is no legal minimum wage, so you will need to think carefully about how much their time is worth.

For some employers, this is made a bit simpler by simply following the legal minimum wage for 16 to 17-year-olds when deciding on remuneration for those that are between 13 to 15. For the current 2021-22 tax year, the legal minimum wage for 16 to 17-year-olds is £4.62 per hour, so this should at least make a good starting point when deciding on what to pay. Children under the age of 16 are also not able to make national insurance contributions, so at this age there won’t be any deductions from their pay until they hit their annual personal allowance. You should ensure that they are added to the payroll however, so the income is reported to HMRC correctly and when their employment with you is finished, issue them with a P45.

Work permits

Depending on where you live in the UK, you may be required to apply to your local council for a permit in order to hire school aged children. You can check with your local council’s education department to find out whether or not you will need one before the employment starts.