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I'm working full time (UK) and my wife is unemployed. Is there a way (legal of course!) for us to take advantage of her personal tax free allowance? If we were each earning only half my salary, we would be more than £2000 better off each year after tax.

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up vote 4 down vote accepted

I wasn't going to answer this as I have only superficial knowledge. But since nobody else has, here is what I believe to be the case.

No, there is no simple tax accounting way of doing this. Once upon a time there was a 'married person's allowance' which essentially allowed you to claim more if you had a non-taxpaying spouse, but I believe that has been ended for people born after 1933.

The way people often try to make this happen is to pay their spouse for some kind of work, and then claim the payment as an expense. However the Inland Revenue is of course on to this. You will get away with it only if it is work that is real and necessary to your business; so you might be able to make it work for bookkeeping, but not for cleaning. And she would really have to do the work. And expect to be audited heavily if you try it.

TL;DR No

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Thanks for your answer. Would it be "legal" to pay my wife for housekeeping? If so, what are the costs/steps involved in doing so? –  flem Sep 11 '12 at 10:05
    
Pretty sure No. But you can check with the IR. –  DJClayworth Sep 11 '12 at 13:34
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It would have to be work directly associated with your own employment; paying her for housework wouldn't be a legitimate employment expense so would come out of your taxed income, defeating the purpose. Unless you're self-employed, you will find it very hard to do this. –  Ganesh Sittampalam Sep 12 '12 at 18:20
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