Edwards Greene Year End Tax Planning Report 2018/19

KEY GUIDE | Month 20XX | Folio Title Folio Title Folio Title Folio Title 3 Income tax saving for couples SPECIAL REPORT | December 2018 | Year End Tax Planning income of £50,000 or more. Withdrawal is total if income is over £60,000, and partial for income between £50,000 and £60,000. You may be able to keep some or all of your child benefit by switching income between you and your partner, or by taking other steps to bring your income below one of these limits. Partner’s salary If you are in business, you could pay an otherwise non-earning partner a salary, on which you will get tax relief. You normally have to keep PAYE records even if the salary is below the national insurance contributions (NICs) limit, which is £503 a month in 2018/19. If, however, the salary is between £504 and £702 a month, your partner will avoid paying any NICs, but will still qualify for state benefits. As well as salary, you can pay an employer’s contribution to your partner’s personal pension plan. There are no taxes or NICs on the payment itself, and it should be an allowable business expense. Be warned that the total value of your partner’s salary, benefits and pension contributions must be justifiable in relation to the work performed. Alternatively, you could plan ahead to share the profits of your business by operating as a partnership in 2019/20. You both need to be genuinely involved as business partners, though not necessarily equally. Useful link: www.gov.uk/government/organisations/ hm-revenue-customs – HM Revenue & Customs site for information about tax, child and working tax credits, child benefit changes, VAT and stamp duties. If you’re in a couple, you might be able to save tax by switching income from one spouse or partner to the other. From the start of the next tax year, you should aim to use both individuals’ personal allowances (£11,850 in 2018/19 and £12,500 in 2019/20) and minimise any higher and additional rate tax. Income over £150,000 is taxed at 45%, and the personal allowance is withdrawn where income (less certain deductions) is more than £100,000. You and your partner might be able to reorganise your financial affairs to avoid exceeding one of these limits. However, there might be capital gains tax (CGT) to pay on switching ownership of an investment if you are not married or in a civil partnership. You can each receive £2,000 of dividends tax free in 2018/19 regardless of your tax status. You might be able to reorganise your shareholdings between you to make best use of this limit. You can also receive £1,000 of savings income tax free if you are a basic rate taxpayer, and £500 if paying tax at the higher rate. If you or your partner have little or no earnings or pension income, you may also be able to benefit from a 0% tax rate on up to a further £5,000 of savings income. Again, you might be able to shift assets between you to make the best use of these limits to minimise tax on your savings income. A £1,000 tax-free allowance is available for income from property, such as where a parking space is let out, so joint ownership could result in a modest tax saving. Child benefit Child benefit is, in effect, withdrawn where either partner has iStock/CasarsaGuru