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Cap on reliefs
There is a ‘cap’ on certain otherwise unlimited tax reliefs (excluding charitable donations) of the greater of £50,000 and 25% of your income. This cap applies to relief for trading losses and certain types of qualifying interest.
Giving your children a good
start
Funding university degrees and saving up a deposit for a first home are increasingly expensive prospects, so the sooner you start planning, the better. All children have their own PA, so income up to £12,570
escapes tax this year, as long as it does not originate from parental gifts. If income from parental gifts exceeds £100 (gross), the parent is taxed on it, unless the child has reached 18, or has married. Parental gifts could be invested to produce tax-free income, or in a Cash or Stocks and Shares Junior Individual Savings Account (Junior ISA) to build a fund to help offset university expenses and minimise debts.
The £100 limit does not apply to gifts into JISAs or National Savings Children’s Bonds.
Childcare scheme
The government’s Tax-Free Childcare (TFC) scheme operates via an online childcare account. Under the TFC scheme, relief is given at 20% of the costs
of childcare, up to a total childcare cost of £10,000 per child per year. The scheme is worth a maximum of £2,000 per child (£4,000 for a disabled child). All children under 12 years old are eligible (or up to 17 for children with disabilities), but parents must meet certain eligibility criteria.
Generation skipping
If your child is grown up and financially secure, it may be worth ‘skipping’ a generation, as income from capital gifted by grandparents or more remote relatives will usually be taxed as the child’s, as
will income distributions from a trust funded by such capital.
Marriage breakdown
Maintenance payments do not usually qualify for
tax relief. The special CGT and IHT treatment for transfers between spouses applies throughout the tax year in which separation occurs. For CGT, transfers in subsequent years are dealt with under the rules for disposals between connected persons, with the disposal treated as a sale at market value, which could result in substantial chargeable gains. For IHT, transfers remain exempt until the decree absolute. Timing is crucial; we can assist you.
A contingency plan
Contingency planning could help to protect your family if you die or become incapacitated. This might include taking out adequate insurance cover, perhaps with life assurance written into trust to ensure quick access to funds. It is also essential to make a Will. We also strongly recommend that you and your spouse:
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Personal And Family Finances