Meg Saksida looks at whether income can be spread tax-efficiently between family members.
Imagine you are an additional-rate taxpayer and have three school-aged children who earn no income. If only you could gift the children some of your investments, thus diverting to them a proportion of your interest and dividends.
The thinking would be that the children could then use their personal allowances, savings-rate band and savings and dividend allowances to cover the income. Each child could receive tax-free up to £18,570 in interest income (i.e., £12,570 covered by the personal allowance, £5,000 by the savings-rate band, £1,000 personal savings allowance or nil rate) and up to £1,000 in dividend income (the dividend allowance or nil rate of £1,000). The total income potentially diverted for the three children would be £58,710, saving tax for an additional-rate taxpayer of £26,420.
