As we enter into a new tax year for many small businesses, we thought it would be a good idea to share just a few tax saving tips for those of you that are married or in civil partnerships:-
Married, in a Civil Partnership or Thinking about It?
Recently introduced in April 2015, the Married Couples Allowance allows married couples and civil partnerships to register at HMRC and save up to £212 per year. Not worth rushing out to get married, but worthwhile knowing, if you are already in one of these relationships.
The allowance allows a spouse or civil partner who doesn’t pay tax, or pays the basic rate of income tax, to transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner – as long as the receiver of the transfer is a basic rate tax payer.
Both members of the couple have to been born on or after 6 April 1935 (if one partner was born before 1935, there is another allowance that can be claimed for instead).
Make the most of your Spouse’s or Civil Partner’s Personal Tax Allowance
Each spouse is taxed separately, so if you are married or in a civil partnership, it is important to maximise the use of each other’s personal tax allowance. If your spouse or civil partner earns less than the personal allowance of £11,000 per year and helps out in your business, you can pay them a salary to reduce your taxable profits.
Your spouse or civil partner could receive a wage between £112 and £155 per week and this would not create a national insurance charge but it would help your spouse gain credits toward the state pension and other state benefits.
If unused, this allowance cannot be carried forward into the next tax year, so it is advisable to use this tax-free allowance each year.
You can Transfer Assets to a Spouse or Civil Partner
If you are selling assets (such as funds, shares or property) then you will be taxed on any gain of more than £11,100. Each individual has a CGT allowance of £11,100 therefore as a couple, you can transfer assets taking advantage of both CGT allowances, up to £22,200 tax-free. The transfer must be a genuine, outright gift.
Capital gains tax rate was significantly reduced in the 2016 Budget. From April 2016, those who pay basic rate income tax will pay CGT at 10% (down from 18%), and higher rate taxpayers will be charged CGT at 20% (down from 28%).
Again, you cannot carry this allowance forward to future years so it is important to make the most of it.
Don’t Forget to Plan for Inheritance – this really is an Important One
For an individual the Inheritance Tax Allowance is currently £325,000, the government is also introducing a main residence allowance of £175,000, phasing in from 2017 with full effect in 2020. The allowances combined allow an individual £500,000 tax-free, where there is a property involved.
But married couples and civil partners can pass any assets to each other free of tax. It is also possible to transfer the first deceased’s nil rate band to the surviving spouse or civil partner, Inheritance Tax can then be deferred until the death of the second person. At that point, double the nil rate band will be available, allowing £1 million per married couple or civil partners to leave to their family.
Nothing Beats the Advice of One in the Know
Do you make sure that you always have a pre year-end tax planning meeting with your accountant? Your accountant can obviously see from your books how well your business is doing, but if this is only once a year at year-end, it’s too late.
A good accountant will have the expertise in all stages of business and tax planning to inject valid contribution. But an accountant can only really help if you keep them involved, this is every good accountant’s hope, to be included at all stages.
We have many years’ experience of tax planning and our advice has saved our clients not only money but peace of mind over the years. This is where we really add true value.
If you’d like advice on anything we have discussed here, please call our office on 01253 899989, we’d be happy to talk through how this affects you and your family’s tax position.
