Reviewing your tax arrangements to minimise liabilities is the right step in enhancing your future financial security. Our team have provided an overview of the tax saving opportunities for your family below.
For couples, “shifting” income so that it accrues to the partner with the lower tax rate in some circumstances is worth taking into account. Some options are highlighted below:
Where couples who are married or in a civil partnership jointly own an income-generating asset, each is taxed on 50% of the income. So simply putting property into joint names can in some situations save tax. However, this does not apply to dividend income from jointly owned shares in close companies (broadly those owned by five or fewer people) which is always split according to the actual ownership of the shares.
If, for tax purposes, it is beneficial for one partner to be taxed on all the income from an income generating asset, full beneficial ownership must be transferred to them. This may give rise to inheritance tax (IHT) and capital gains tax (CGT) implications, particularly for non-married couples.
Introducing a spouse as a partner in a business or giving a partner shares in a company will normally be effective in “shifting” a proportionate share of income subsequently arising.
Parents can transfer income-producing assets to an unmarried child aged under 18, but the parent will be taxed unless the income is less than £100 a year. Gifts by grandparents or gifts to children aged 18 or more are not affected by this rule.
A parent can put money into a personal pension for a child. Even if the child has no income, the parent can pay in up to £2,880 a year, which becomes £3,600 with tax relief.