Tax savings could be achieved by the transfer of income producing assets to a child, to take advantage of the child’s personal allowance. If the annual income arising is above £100, this cannot be done by the parent. The income will still be taxed on the parent. However, transfers of income producing assets by grandparents or others, will be effective.
A parent can use a ‘bare trust’ which would allow a child to use any entitlement to the CGT annual exemption.
Child Tax Credit
Depending on various factors Child Tax Credit (CTC) might be available to some families. To check if you are entitled to claim visit the HMRC website.
The High Income Child Benefit Charge
High Income Child Benefit Charge applies to a taxpayer who has adjusted net income over £50,000 in a tax year. And where either they or their partner are in receipt of Child Benefit for the year. If both partners have incomes in excess of £50,000, the charge will apply to the partner with the higher income.
The income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. Therefore, the charge on taxpayers with income above £60,000 will be equal to the full amount of Child Benefit received. If the claimant or their partner do not wish to pay the charge, it is possible to elect not to receive the Child Benefit.
The Child Benefit for two children amounts to £1,788.
The taxpayer’s adjusted net income is £53,000.
The income tax charge will be £536.
This is calculated as £17.88 for every £100 above £50,000.
If you live in Greenwich, Bromley, Kent and London we, at Adiva Accountants in Greenwich can help you pay less Child Benefit charge, so why not call us today.