Posts Tagged ‘Income tax allowances’

Children and tax

• Children have their own tax allowances and can use these against their own income, but anti avoidance law prevents parents from transferring investments to unmarried children under 18 so that they benefit from the income tax allowances. No more than £100 of income can be transferred in this way.
   
• If children are employed in a business owned by the parent then income can be paid to them as wages. This is an acceptable route to take provided legislation designed to protect children from exploitation is observed. National Insurance contributions will be due on the wages paid that exceed the limit (currently £110 per week) once the child is 16. You must observe normal PAYE obligations when you employ a child, so they should complete form P46 and you should put them on the payroll if they are paid more than £95 per week.
   
• Income paid on a child trust fund investment is not taxable on the child or the parent even where the invested funds come from the parent.