sold to minimise tax. Advice should be sought before undertaking such transactions to ensure that all tax aspects have been considered. Please contact us for CGT advice. Note that CGT neutral transfers do not apply to unmarried couples. Children Transferring income to children If a child has sufficient income to make them liable, they will be taxed in exactly the same way as an adult. However they also benefit from their own personal allowances and tax bands. Where their only income is low, there may be some scope for transferring income producing assets to the children to use up their personal allowance. Note that if assets are provided by a parent then the income remains taxable on the parent, unless it does not exceed £100 (gross) each tax year. However, this option could be considered where grandparents or other relatives wish to pass on wealth. Be mindful of capital and inheritance tax implications of the transfers of assets. Tax Planning Children may be employed in the family business so as to take advantage of their personal allowance (subject to legal restrictions). It is essential that payment is only made for actual work carried out for the business and at a reasonable commercial rate.
Children and capital gains Children also have their own annual exemption for CGT, so assets transferred to them which are expected to grow in value may prove to be advantageous. Child Trust Funds (CTFs) The availability of new CTFs ceased from January 2011, as did government contributions to the accounts. Existing CTFs, however, continue to benefit from tax free investment growth. No withdrawals are possible until the child reaches age 18. However, the child’s friends and family are able to contribute up to the annual limit of £9,000. It is possible to transfer the investment to a Junior Individual Savings Account. Junior ISA (JISA) A JISA is available for UK resident children under the age of 18 who do not have a CTF account. JISAs are tax advantaged and have many features in common with existing ISAs.
They are available as cash or stocks and shares based products but a child can only have one cash JISA and one stocks and shares JISA. The annual investment is limited to £9,000. Other children’s savings options are available which may be tax efficient such as National Savings Children’s Bonds and Friendly Societies’ savings plans. High Income Child Benefit Charge A charge arises on a taxpayer who has adjusted net income over £60,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year. Where both partners have adjusted net income in excess of £60,000 the charge applies to the partner with the higher income. Note in this case ‘partners’ does not just include spouses and civil partners but also couples living together as if they were married or in a civil partnership.
Family Matters
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