Tax planning for year end: Income tax saving for couples
Michael Lansdell gives some planning tips.
Many of us will have spent more time with our spouses or civil partners than ever of late. And, as we head towards the end of another financial year, your nearest and dearest may be able to help you save on income tax, too. Just another benefit to having them around!
You and your spouse/civil partner should aim to both use up your tax-free personal allowances (£12,500 in 2020/21), to minimise any income tax to be paid at the higher, or additional/top rate. Reorganising your financial affairs might help you to stay under the limits – CGT may apply when you switch ownerships of an investment if you aren’t married/in a civil partnership though, you must stay within the rules.
Savings allowances and child income
Regardless of your tax status, both of you can receive £2k of dividends tax-free – could you make better use of this limit by rejigging shareholdings? If you are a basic-rate taxpayer, you can have £1k of savings income tax free (£500, if you are paying tax at the higher rate). If either of you have little/no earnings or pension income, there is a zero per cent tax rate on up to £5k of savings income – again, shifting certain assets could be the key to minimising tax.
If either partner has an income of over £60k, child benefit is withdrawn (partially withdrawn for any income between £50k and £60k). However, you may be able to keep some or all of it by switching income between you and your partner, or by taking steps to bring your income to below one of these thresholds.
Figurit can help you with your tax planning, and with saving money in the next financial year. Talk with our experienced team to explore ways that you and your partner could, with some creative thinking and simple reorganisation, optimise your finances.
For more information call Figurit (formerly known as Lansdell & Rose) on 020 7376 933.