This is a good time to look forward to 2012/13 and assess who will be earning what in your family. The level of personal allowances (tax free income) have increased significantly over the last two years, and are expected to increase again in 2012/13 to at least £8,105 per person.
This allowance cannot be transferred between family members, so if some people in your family are earning less than this, their personal allowance is going to waste.
Strategies you may consider to avoid wastage of the personal allowance include:
- Employing your spouse or children in your business, perhaps on a part-time basis.
- Transferring an income-producing asset, such as a let property or savings account into the name of the lower earning spouse.
- Taking on a family member as a partner in your business, so they can share some of the profits.
- Ensuring the higher earner makes all the Gift Aid donations to charities from the family.
These changes should be made as soon as possible to gain the maximum advantage in 2012/13. The strategies need to be implemented correctly so please contact us for advice before proceeding.
Remember the Government plans to withdraw child benefit in 2013 from parents where either person pays tax at 40% or higher. To retain your child benefit (worth at least £1,055 per year) you need to ensure your taxable income is below the 40% threshold, which is set at £34,370 after allowances for 2012/13.