Tax Planning for Families
Safe and secure ways to pay less tax on family money
A Tips & Advice book about...
In a nutshell
This book is essential reading for every family seeking to maximise its financial position. Fully up to date with the latest rates and HMRC practice, it offers easy-to-implement and 100% safe tax-saving strategies for all your family assets. The many tax planning ideas this book offers are sure to help you maximise and preserve your family’s wealth.
Like most families, you probably have a range of different financial requirements and goals. Whether you want to boost your family’s net worth or help your children buy their first home, this book will help your goals become a reality. In comprehensive detail, it examines issues such as:
- Making the best use of family members in your business
- Passing on the family home without incurring a nasty bill
- Arranging your investment portfolio to maximise efficiency
- The tax benefits of buying a property jointly
- Tax-efficient gifting of buy-to-let properties to your family
- Transferring your wealth to the next generation in the best possible way
- And so much more...
This book also contains useful documents such as template elections to put our ideas into practice quickly and easily. So take full advantage of the tax-saving and wealth creation opportunities this book offers your family.
We've created this Tips & Advice book especially for...
Anyone that wants to:
- Maximise and preserve their family’s wealth
- Take full advantage of the available tax-saving opportunities
Tax advisors and accountants that want to:
- Provide their clients with the best possible advice on this topic
You'll get the following free extras with this Tips & Advice book...
An online service with ready-to-use documents
- To immediately apply our advice and solutions in practice
- That you can easily adapt to suit your own requirements
In this Tips & Advice Book you'll read about...
Table of contents
Chapter 1 - The family company
1.1. Income tax rates
1.2. Employing your family
1.2.1. When is it beneficial to employ your spouse?
1.2.2. What’s the optimal salary to pay your spouse?
1.2.3. Could your spouse be a self-employed contractor instead?
126.96.36.199. Is it more tax efficient for them to be an employee or self-employed?
1.2.4. Can your company pay your children a salary?
188.8.131.52. Why is it more tax efficient?
184.108.40.206. How many hours a week can your children work?
220.127.116.11. What’s the optimal amount to pay your child?
1.3. Paying dividends to family members
1.3.1. How much could your spouse receive in dividends?
1.3.2. How does your spouse become entitled to dividends?
1.3.3. Using alphabet shares
1.3.4. Is it preferable for your spouse to take a salary or a dividend?
1.3.5. Can your children receive dividends from your company?
1.4. Paying pension contributions to family members
1.4.1. What tax relief is available for pension contributions?
1.4.2. Can your company make a tax and NI-free pension contribution for your spouse or child?
1.4.3. Can your company make a tax-free pension contribution for a non-working spouse or child?
1.5. Can the company buy your spouse/children a car?
1.6. Do you have to pay CGT on a transfer of shares to your spouse?
1.6.1. Do transfers between spouses have any effect on entrepreneurs’ relief (ER)?
1.7. Do you have to pay CGT on gifts of shares to your children or other family members?
1.7.1. What is “gift relief”?
1.7.2. How do you make a claim?
1.7.3. Is there a time limit for making the claim?
1.7.4. Is there a way to take advantage of the annual CGT exemption?
18.104.22.168. What’s the right price to sell at?
1.7.5. Can you transfer the shares into a trust for your minor children?
1.7.6. Avoiding the gift relief investment trap
1.7.7. Watch out for the non-resident trap
1.8. Business property relief
1.8.1. What are the qualifying conditions?
1.8.2. What does “wholly or mainly” mean?
1.8.3. How to avoid the binding contract for sale trap
1.8.4. Excepted assets trick
1.8.5. How to get around the “excess cash” problem
1.8.6. How does BPR affect lifetime transfers of company shares?
1.8.7. The replacement asset trick
1.8.8. Should you transfer the shares during your lifetime or hold onto them?
1.8.9. Who should you leave the company shares to in your will?
Chapter 2 - The family home
2.1. Self-employed and working from home
2.1.1. What’s an acceptable way to apportion your household expenses?
2.1.2. What expenses can you claim?
2.1.3. What are the flat rate expenses for use of home?
2.1.4. Special rules for partnerships using flat rate deductions
2.2. Homeworking directors and employees
2.2.1. How much can you claim from your company for working at home?
2.2.2. Can you claim a tax deduction instead?
2.2.3. How much can you claim as a tax deduction?
2.2.4. Can you charge your company rent for use of your home?
2.2.5. Can you claim the £1,000 property allowance against the rent you receive from your company?
2.3. Rent-a-room relief
2.3.1. Gross rent less than £7,500?
2.3.2. Gross rent more than £7,500?
2.3.3. Is the £7,500 per person or per property?
2.3.4. Can more than one room be let?
2.3.5. Do you have to live in the property to claim the relief?
2.4. Higher CGT rates for residential property
2.5. Private residence relief
2.5.1. How much can you claim?
2.5.2. The “18-month rule”
2.5.3. What other periods of absence from the property still qualify for PRR?
2.5.4. What happens if you’ve bought a property but can’t move in until it’s been renovated?
2.6. “Flipping” homes
2.6.1. Is flipping still allowed?
2.6.2. How do you make an election?
2.6.3. How do you change the election?
2.6.4. What happens if you don’t make an election?
2.7. Selling land that’s part of your home
2.7.1. Would it be better to sell the property before you sell the land?
2.7.2. Develop and move
2.8. Lettings relief
2.8.1. What’s it worth?
2.8.2. Can spouses each claim the relief?
2.8.3. Should you put your two properties into joint names when marrying?
2.9. Is PRR affected if adult children still live at home?
2.10. Separation and divorce
2.11. CGT and use of home as office
2.12. Will IHT be payable on your home?
2.12.1. How much is the new residence nil rate band (RNRB) worth?
2.12.2. What happens if there’s unused RNRB after the first death in a couple?
2.12.3. Can you claim the RNRB if you leave the family home to a discretionary trust?
2.12.4. Is the RNRB available if you downsize?
2.13. Can you give the family home to your children before you die to avoid IHT?
2.13.1. The gift with reservation of benefit problem
2.13.2. Are there any exceptions to the reservation of benefit rules?
2.13.3. Leave your share of the house to your children
2.13.4. What is the pre-owned assets charge?
22.214.171.124. How is it calculated?
126.96.36.199. Are there any situations when the charge doesn’t apply?
188.8.131.52. How can you dodge the POA charge?
2.13.5. Gift and pay market rent
2.13.6. Transfer your home to a trust for your children
2.13.7. Gift the house to your children and move into your second home
2.13.8. Sharing the house with your child
2.13.10. Equity release
2.14. What’s the difference between joint tenants and tenants in common?
2.14.1. Which method should you use?
2.14.2. How do you change from joint tenants to tenants in common?
Chapter 3 - Buy-to-let property
Many people buy their first buy-to-let property in their sole name. However, buying a property jointly can lead to significant tax
savings. This chapter looks at the tax effects of owning a
property jointly, firstly with your spouse and then with someone else in your family.
3.1. Joint ownership with your spouse
3.1.1. Can you save income tax on rental profits if you transfer the property to your spouse?
3.1.2. If you own a property jointly with your spouse, do you always have to split the rental profits equally?
184.108.40.206. What’s a declaration of trust?
3.1.3. Is the situation different for furnished holiday lets?
3.1.4. Can you split the income but retain ownership of the property?
3.1.5. Is there another way to retain majority ownership of the property but reduce tax on your rental profits?
3.1.6. Using your spouse to counter the mortgage interest relief restriction
3.2. Joint ownership with your children
3.2.1. Can you save income tax if you transfer part of the property to your adult children?
3.2.2. Can you save income tax if you buy or transfer a property to minor children?
3.2.3 If you’re a joint legal owner with an adult child, how can you avoid declaring a share of the rental income on your tax return?
3.2.4. Would the situation be different if you had paid the deposit?
3.3. Paying your spouse/partner to run your property business
3.3.1. How much can you pay them?
3.4. Can you save CGT if you own the property jointly with your spouse?
3.4.1. If you own a property jointly with your spouse, will the capital gains automatically be split 50:50 like rental income?
3.4.2. Can you transfer half of the property to your spouse before you sell it to make use of their annual exemption?
3.5. How to avoid CGT with joint ownership with another family member
3.5.1. Can you save CGT if you own a property with someone other than your spouse?
3.5.2. Can you transfer half the property to your adult children before you sell it to make use of their annual exemption?
3.5.3. Make use of the annual exemption and transfer in stages
3.5.4. Can you buy a property in the name of your minor children?
3.6. How to structure a property purchase for your children
3.7. Using trusts to defer CGT on buy-to-let gifts to family members
3.7.1. Can the trust beneficiaries live in the property and claim PRR?
3.8. How to avoid CGT on gifts of furnished holiday lets
3.8.1. What are the qualifying conditions for a FHL?
3.8.2. How to reduce the CGT on the eventual sale of the holiday let
3.8.3. Don’t gift the FHL, sell it at undervalue
220.127.116.11. If you want to sell your furnished holiday home to your children for a higher price, can you claim entrepreneurs’ relief on any taxable gain?
3.9. Using private residence relief and lettings relief to reduce CGT on buy-to-let properties
3.9.1. Live and let
3.9.2. Let and live
18.104.22.168. Is there a minimum length of time needed to live in the property?
3.10. Are there any IHT implications of leaving a property to your spouse?
3.10.1. What about lifetime transfers to your spouse?
3.11. What are the IHT implications of gifting buy-to-let properties to your children?
3.11.1. How does IHT interact with CGT?
3.12. Equity release
3.13. Do FHLs qualify for IHT business property relief?
3.14. What are the rates of SDLT?
3.14.1. Will you have to pay any SDLT when you transfer part of the property to your spouse?
3.14.2. Is there a way to avoid the additional 3% SDLT when buying a second property?
Chapter 4 - Cash savings
4.1. How is savings income taxed?
4.1.1. Does ISA income count towards your personal savings allowance?
4.1.2. What about interest from National Savings & Investments (NS&I)?
4.2. Can you transfer your savings to your spouse to avoid paying tax?
4.3. Do you have to split the income on a 50:50 basis in joint savings accounts?
4.3.1. Can you elect for a different allocation?
4.4. How can your company pay tax-free interest of up to £6,000 on any cash you lend to it?
4.4.1. Can your spouse get up to £6,000 in interest tax-free too?
4.5. Can you transfer savings to your children to avoid paying tax?
4.5.1. Is there a way to get around the £100 income limit?
4.5.2. Are Junior ISAs subject to the £100 limit?
4.5.3. If your child has a Child Trust Fund - can you open a Junior ISA for them?
4.5.4. Can you invest in Premium Bonds for your child?
22.214.171.124. Will you be taxed on your child’s Premium Bond winnings?
4.5.5. Are there any other tax-free investment options for your children?
4.5.6. Can you contribute to a pension for your children?
4.6. Are there any CGT implications of transferring cash savings to another family member?
4.7. What are the IHT implications of giving cash away?
4.8. How can making regular gifts help reduce IHT?
4.8.1. How much cash can you give away?
126.96.36.199. What if your income drops in one year?
4.9. Are there any other ways to make cash gifts IHT free?
4.9.1. How do you to give away £6,000 capital to your children IHT free?
4.9.2. Can you make any other IHT-free capital gifts on top of the £3,000 IHT annual exemption?
Chapter 5 - Share investments
5.1. Can you transfer dividend income to your spouse?
5.1.1. How can you avoid an HMRC challenge to your dividend income splitting?
5.1.2. Does the 50:50 rule apply to jointly owned listed shares?
5.1.3. Can you elect for a different allocation?
5.1.4. Is there a way to shift income to your spouse but keep beneficial ownership?
5.2. Can you transfer dividend income to your children?
5.2.1. What’s the position if your children are over 18?
5.2.2. Can grandparents shift dividend income to their grandchildren?
5.3. Are there any CGT implications of transferring share investments to your spouse?
5.3.1. What’s the CGT position if your spouse is not domiciled in the UK?
5.3.2. Can you use your spouse to avoid the bed and breakfasting rules?
5.3.3. Making the most of capital losses
5.4. Are there any CGT implications of transferring shares to your children/grandchildren?
5.4.1. Is there a way to avoid the CGT bill when you transfer shares to your children/grandchildren?
5.5. Are there any IHT implications when transferring shares to your spouse?
5.5.1. What’s the IHT position if your spouse is not domiciled in the UK?
5.6. What are the IHT implications when transferring shares to your children?
5.6.1. If you transfer the shares into a trust with your children as beneficiaries, can you avoid IHT?
5.7. Do the shares qualify for business property relief?
5.7.1. Turning unqualifying shares into qualifying ones
5.7.2. IHT planning for elderly and infirm relatives
Chapter 6 - Children’s education
6.1. Are there any tax breaks for nursery fees?
6.1.1. How does the government’s TFC scheme work?
6.1.2. Can you use TFC to pay our nanny?
6.1.3. Should you switch from childcare vouchers to TFC?
6.2. Can you get a tax deduction for private school fees?
6.2.1. Can you save tax if your company pays for your children’s school fees?
6.2.2. The private school is a registered charity so can you treat the fees as a charitable donation and claim gift aid relief?
6.2.3. How to use your pension fund to pay school fees
6.2.4. Are there any tax breaks if grandparents pay the school fees?
6.2.5. Is it advantageous for the grandparents to set up a trust to pay school fees?
6.2.6. Using buy-to-let property income to pay school fees
6.2.7. Using offshore investment bonds to pay school fees
188.8.131.52. What if the parents pay into the bond instead of grandparents?
6.3. Funding higher education
6.3.1. Can you divert some of your income to your student child?
6.3.2. Can your company pay for your child’s university tuition fees?
6.3.3. Student landlord
Chapter 7 - Further income tax saving strategies
7.1. Have you claimed the marriage allowance?
7.1.1. Who can make a transfer?
7.1.2. Who can be the recipient?
7.1.3. How much allowance can be transferred?
7.1.4. How do you make a claim?
7.1.5. When is a transfer worthwhile?
7.1.6. What happens if you separate?
7.2. The high income child benefit charge
7.2.1. What is the high income child benefit charge (HICBC)?
7.2.2. What counts “adjusted net income”?
7.2.3. Can you transfer income to your spouse to reduce the HICBC?
7.2.4. Make pension contributions to reduce the HICBC
7.2.5. Reshape your income to reduce the HICBC
7.2.6. If your income is always going to be over £60,000, should you or your partner elect not to receive child benefit?
7.2.7. If I’ve opted out, can I opt back in?
Chapter 8 - Appendices
Appendix 2 - Scottish income tax rates
Appendix 3 - Land transaction tax (LTT) and land and buildings transaction tax (LBTT)
Chapter 9 - Documents