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Are you making the most of your tax allowances as a family?

Paystream News

David McManus

Monday 25th Sep, 2017

The UK tax system provides reliefs and allowances to encourage you to spend or invest in certain ways. Using those reliefs as they are intended is the fiscal equivalent of obeying the Highway Code. If you divert from that code, by parking incorrectly, you would expect a penalty. The tax system also imposes penalties to discourage bad behaviour.

Tax planning involves making best use of tax reliefs while at the same time avoiding penalties for careless or unacceptable behaviour.

One way to reduce the marginal tax rates for the highest earners is to share income or gains around the family by doing so you make use of the allowances available to those on lower incomes. Taken together, this should result in a tax saving for the family as a whole.

To be effective, the lower earner must own the investment, bank account or shares which produce the income or gain. A family business can be used to share income by employing family members or by allowing each person to hold a share in the company or partnership.

Transferring shares or property can create tax charges, so take advice before giving away assets. Married couples or civil partners can generally transfer assets between them without tax charges. Where a spouse has a high income and holds valuable assets, tax can be saved by transferring assets into joint names.

If long term tax planning and dealing with HMRC is leaving you in a whirlwind of confusion then sign up to our Tax Advice Service.

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