The income tax charge applies at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid. Child Benefit claimants are able to elect not to receive Child Benefit if they or their partner do not wish to pay the charge. Equalising income can help to reduce the charge for some families. Example Phil and Jane have two children and receive £1,828 Child Benefit. Jane has little income. Phil expects his adjusted net income to be £55,000. On this basis the tax charge will be £914. This is calculated as £1,828 x 50% (£55,000 - £50,000 = £5,000/£100 x 1%). If Phil can reduce his income by £5,000 to £50,000 no charge would arise. This could be achieved by transferring investments to Jane or bymaking additional pension or Gift Aid payments. Tax-Free Childcare The scheme is available to families where all parents are working (on an employed or self-employed basis) 16 hours a week and meet a minimum income level (generally £142 a week) with each earning less than £100,000 a year. Parents who are receiving support through Tax Credits or Universal Credit are not eligible. Parents need to register with the government and open an online account. The government ‘top up’ payments into this account at a rate of 20p
unmarried couples to each make a Will if they wish to benefit from each other’s estate at death. Remember all the special rules for married couples, both those dealt with in this section and those covered in other sections of this guide, apply equally to same-sex couples who have entered into a registered civil partnership or marriage. Aword of warning Transferring assets or interests in a business between husband and wife may attract the interest of HMRC especially where it is obvious that it has been done primarily for tax saving purposes. Transfer of ownership of an asset must be real and complete, with no right of return and no right to the income on the asset given up. If a non-working spouse is given shares in an otherwise one-person, private company, HMRC may, in some circumstances, seek to tax the working spouse on all of the dividends under what is known as the ‘settlements legislation’. You may want to consider obtaining advice from us before entering into this type of arrangement. Checklist for Couples
for every 80p that families pay in. The scheme is generally limited to £10,000 per child per year. The government’s contribution is therefore a maximum of £2,000 per child. Employer Supported Childcare (see the Working for Others section) closed to new entrants on 4 October 2018. Parents who qualify for both schemes are able to choose which scheme they wish to use but families cannot benefit from both schemes at the same time. To find out about all childcare options visit www.childcarechoices.gov.uk What about unmarried partners? It still pays to equalise income as much as possible, as income tax will be minimised. However, transfers of assets may be liable to CGT and, if substantial, could also lead to an inheritance tax liability. It is vital for
Try to equalise your income.
Consider placing assets in joint names.
If you have children consider making use of their personal allowances.
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Family Matters
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