The government is trying to encourage people back to work, but there are some current topical issues to consider when you have children:
Child tax credits
For lower income families tax credits are available based on your taxable income and for business owners most of this information is available once their tax return has been completed. The deadline for completion is 31 July without potentially losing payments, so it is advisable to complete your tax return by this date if this applies.
Childcare vouchers
Companies can pay for childcare vouchers of upto £55pw for their employees without deduction of tax or NI, so for company directors with their own company this is a way of withdrawing money from the company, getting relief for corporation tax, and without any effect on the personal tax situation. The vouchers can only be used to pay registered child minders so is limited in how useful it may be.
Child benefit
This is payable to all families with children in full time education but is recovered in full from families where one of the parents earns more than £60k, and partially in the band from £50-£60k. There is the ability to opt out of receiving child benefit so it does not need to be repaid but one of the consequences is that the mother (who does not work) will miss out on National Insurance contributions for that tax year. It is recommended that parents do not opt out but continue to receive it and declare the income on their tax return and repay the tax.
These are some of the benefits and consequences in the tax system of having children and what can be down by owner managed businesses. There may be other considerations in your situation so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”