TAX TIP OF THE WEEK – Looking to pass wealth on to your kids?
There are 2 tax traps with just transferring money into their savings accounts:
1. Interest earned from these accounts (if more than £100/annum) couldn’t as your income, so you could end up paying tax on it.
2. Gifts of more than 3k per annum will count towards the annual exemption meaning it could be subject to inheritance tax.
The way around this is to make gifts out of unused income, as long as it is regular & doesn’t impact your own normal standard of living it is outside of Inheritance tax.
To get around the income tax trap you could consider making the gifts to a registered pension plan for your children, ok they may not get access to it until they are 55, but HMRC will top up any contribution made by 20%.
Nice of them to give something for a change…
For more tax strategies download our 71 ways to save tax checklist https://bit.ly/2YQbhvr