Planning For Your Children's Future.
As minors, children are too young to take over the family business, but many clients look for advice on how to divert income to their children in the meantime. As well as planning for the future of their children, parents often hope to mitigate their own tax bills as an additional benefit. However, HMRC’s settlement legislation means that the parents remain liable to tax on this diverted income, be it cash, stock, shares etc, unless the income is less than £100 per year per child. Once a child reaches the age of 18 this settlement legislation ceases to apply, and the young adult will benefit from the usual tax-free income threshold in relation to this income.
While transferring shares to a child does not mitigate the tax to be paid at the time, it can be beneficial in the longer term. For instance, when the child reaches the age of 18, the dividends the young adult receives from the company can be used to fund things such as university fees. Using the transferred dividends to pay for their education saves the parent from paying the fees from their own taxed income.
For help and advice on long term planning for your family, please call us on 01524 67111. A member of our senior management team will be happy to arrange a no obligation chat at our offices in Lancaster.
Author: James Cornthwaite FCA CTA
A former pupil at St Aidan’s C of E High School, James attended Blackpool Sixth Form College and Lancaster University, graduating in 2004, gaining BSc. first class honours. He joined Moore and Smalley, Preston in 2005 and qualified as a...
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