Yes, the Life in the UK test is absolutely required.
If it was taken after December 2019, instead of a pass certificate, your wife will have received a unique reference number which must be entered into the online application.
From the Life in the U.K. test webpage on the gov.uk site:
If you pass the test
You must score 75% or more to pass the test.
You’ll get a ‘unique reference number’. You’ll need this number to complete your citizenship or settlement application. The Home Office will use it to check that you’ve passed.
If you took your test before 17 December 2019, you’ll have a letter with a ‘test reference ID’ instead of a unique reference number.
If you have lost your letter, send a letter explaining that you have lost it with your citizenship or settlement application.
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