The transferrable marriage allowance arrived in 2015 but was widely considered to be a bit of a damp squib as very few couples could claim it and a separate claim needed to be made.

So, what’s it all about? If you are married or in a civil partnership and one of you doesn’t fully utilise their personal allowance, while the other is a basic rate taxpayer, then the lower earning spouse/partner can transfer (up to) 10% of their personal allowance. This generates a tax saving of (up to) £238 for the higher earning spouse/partner based on the current £11,850 personal allowance.

To claim the relief you must be married or in a civil partnership, and have taxable earnings below the personal allowance level (£11,850 for 2018/19), while your spouse/partner must earn between £11,850 and £46,350 (£43,430 if you’re in Scotland).

In practice, among our client base we haven’t been able to identify many clients who are eligible to claim the relief, but where one spouse is not working for a period of time then a claim would be well worth making.

To claim the relief involves making an election to HM Revenue & Customs, but this can be backdated to include any tax year from 2015/16 onwards currently (any claim must be made within four years of the end of the tax year to which it relates).

Changes were recently made to open up claims to the personal representatives of a deceased taxpayer for any tax year up to and including the year in which they died, providing they were still married or in a civil partnership at the date of their death.

With company car tax based on CO2 emissions and the list price when new, company cars are rarely tax efficient for company owners, usually due to the type of cars they want to drive!

We are often asked whether or not a company Director/owner should buy their new car via their company or own it personally, and 9 times out of 10 the answer is to own it personally due to the emissions-based company car tax rules which penalise anything other than the lowest emission cars.

However, with the cost of car insurance for 17 and 18 year olds being so high, and with most parents wanting their children’s first car to be safe, economical and not too powerful, the prospect of buying a low emission car through your company for your child to use is well worth considering.

Let’s consider the company car benefit in kind percentages for 2018/19 for low emission cars, which are as follows:

At these low emission levels, the amount of money your company can save in Corporation Tax in buying, insuring and running a car for your child (excluding fuel) will often outweigh the extra personal tax you will have to pay as a Director on the benefit in kind. Especially when you factor in the high cost of insurance for young drivers.

In addition, if your child works for your company (full or part-time) then they would incur the benefit in kind in their own right, meaning that it wouldn’t have to go down on your P11D. This can be advantageous where your child earns less than their tax-free personal allowance, since the benefit in kind may not then trigger any payment of personal tax.

This is best explained with an example. Your child turns 17 and you buy a VW 1.0 Take-up! 60PS S/S for them to use which has a list price of £9,605 and CO2 emissions of 96g/km.

The benefit in kind will be £9,605 x 20% = £1,921. If your child doesn’t work for the company then this will go on your P11D. Assuming you earn a low level salary of £8,424 (the optimum level in most cases) as a Director/shareholder then with the personal allowance being £11,850, and assuming no other sources of income other than your salary and dividends from the company, then you would pay no personal tax on this benefit in kind. However, it would have a knock-on impact on the level of dividends you can withdraw from the company before hitting higher dividend tax rates.

The company will have to pay Class 1A NIC @ 13.8% of the benefit in kind amount, which equates to £265, but then it will save tax on the cost of buying the car, insuring it, plus servicing, tyres and other running costs (other than fuel), and the Class 1A NIC cost.

All in all the small personal tax cost (if any) plus the minor Class 1A NIC cost should be more than outweighed by the Corporation Tax saving for the company, making this a very tax efficient perk that is well worth considering.

There are many reasons to consider holding the shares in your trading company through a separate holding company, the main one being to safeguard retained profits.

We often recommend setting up a holding company to successful owner managed business owners, with the owners to then transfer their shares in the trading company to the new holding company, in return for owning shares in the holding company. Such transfers can usually be executed without triggering any Capital Gains Tax or stamp duty, through use of share for share exchange exemptions.

After these steps have been taken a simple group is formed, with a holding company at the top which owns the shares in the trading company or companies. Dividends can pass from the trading company or companies to the holding company tax-free, which then allows surplus retained profits to be moved up into the holding company, where they are ring-fenced from the trading company, so that if anything adverse happens to the trading company these funds are safeguarded. The owners then take their dividends from the holding company.

There are many other reasons why holding companies can be advantageous, but one potential benefit relates to the tax on a future sale of the trading company. As set out in this month’s Tax News article, the Substantial Shareholding Exemption (SSE) means that where a company owns more than 10% of the shares in another company, and sells those shares, there is no tax to pay on any gains arising.

In many cases the sale of your trading company might be linked to retirement, and you may want to access the proceeds from the sale of the trading company personally. In this case, while the sale of the trading company’s shares by your holding company will be tax exempt thanks to the SSE, you would then need to liquidate the holding company to access the funds as capital, upon which Entrepreneurs Relief could be claimed, so that you only pay 10% tax.

In such cases, you have gained nothing by holding the shares via a holding company, as if you still owned the shares in the trading company personally, you should have qualified for Entrepreneurs Relief when you sold them, with a 10% tax rate applying. In fact, you would be slightly worse off, due to the costs of liquidating the holding company to access the funds as capital (rather than dividends).

But, what if you want to invest the proceeds from the sale of the trading company in another trading venture? In this case holding your shares via a holding company provides a useful advantage as it will be possible to reinvest the proceeds into a new venture without incurring any tax on the sale.

Similarly, you may wish to invest the proceeds into a buy-to-let portfolio. Due to changes to income tax for individuals owning property, it is often better to hold properties in a company, so with the holding company structure you could do this without first incurring 10% tax, as you would have if you had owned the shares in the trading company personally.

With the 31 January Self Assessment tax payment deadline looming, we often encounter clients that want to reduce their tax liabilities. But surely it’s too late now?

Unfortunately, the good old days where it was possible to make a pension contribution in one tax year and relate it back to the previous year are long gone, with no such retrospection now possible.

However, there are still a couple of tax reliefs available where you have the option to claim the tax relief in the current tax year, or carry it back to the previous tax year.

The first of these relates to investments made under the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS). These tax advantaged investments give the investor income tax relief (30% of the investment made for EIS; 50% of the investment for SEIS) which can be claimed in the tax year of investment, OR in the previous tax year.

Secondly, charitable donations under the gift aid scheme can be related back to the previous tax year. Under gift aid, basic rate (20%) tax relief is given to the charity at source, and therefore further tax relief is only available through Self Assessment for higher rate (40%) and additional rate (45%) taxpayers.

In both cases, claiming the tax relief in the previous tax year would also help to reduce the payments on account for the current tax year, the first of which also falls due for payment this month.