Edwards Greene Year End Tax Planning Report 2019/20

KEY GUIDE | Month 20XX | Folio Title Folio Title Folio Title Folio Title 3 Income tax saving for couples SPECIAL REPORT | December 2019 | Year End Tax Planning £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 must keep PAYE records even if the salary is below the national insurance contributions (NICs) limit, which is £512 a month in 2019/20. If, however, the salary is between £512 and £719 a month, your partner will avoid paying any NICs, but will still qualify for state benefits. ● You can also 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. However, 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 2020/21. You both need to be genuinely involved as business partners, though not necessarily equally. Switching income from one spouse or partner to the other can help save tax. You should always aim to use both individuals’ personal allowances (£12,500 in 2019/20, with a similar figure enacted for 2020/21) and minimise any higher and additional or top rate tax. ● Income over £150,000 is currently taxed at 45%, or 46% for non-savings, non-dividend income in Scotland. ● The personal allowance is withdrawn where income (less certain deductions) is more than £100,000. You might be able to reorganise your financial a airs between you to avoid exceeding one of these limits. However, capital gains tax (CGT) may be payable 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 2019/20 regardless of your tax status. Reorganising your shareholdings between you may make better 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 might also benefit from a 0% tax rate on up to a further £5,000 of savings income. Again, shifting assets between you can help 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 Where either partner has income of £50,000 or more then child benefit is in e ect withdrawn. This is total if income is over £60,000, and partial for income between £50,000 and iStock/CasarsaGuru Planning point Although some planning is possible before the end of 2019/20, you will gain the maximum income tax saving if plans are put in place before 6 April 2020 so that you benefit for the entire 2020/21 tax year.