Accountants Newcastle | London

❓ FAQ of the Week: Can I pay a salary to a family member through my company and reduce my tax? 👨‍👩‍👧‍👦💷

Many business owners ask if paying a salary to a spouse or child is a legitimate way to reduce their tax bill. The answer is yes, but only if it is done correctly.

📌 The work must be genuine

Any salary must be for real work performed. HMRC expects a proper employment contract, genuine duties and pay that is in line with what you would pay someone outside the family. Overpaying for minimal work could result in the salary being disallowed.

📌 Understand the settlements rules

HMRC can challenge payments made with the sole purpose of diverting income. However, salaries for genuine work or dividends paid on shares genuinely owned by a spouse are usually acceptable.

📌 Set the salary at the right level

The most efficient salary is often around the personal allowance, currently £12,570 for 2024/25, so the family member gains National Insurance credits without paying tax or employee NICs. If they have other earnings or benefits, a lower salary may be more suitable.

📌 Keep proper records

Salaries must be paid through payroll, reported under Real Time Information and transferred to the family member’s own bank account. This is essential to show HMRC it is a genuine arrangement.

📌 Consider dividends as well

If family members hold ordinary shares, they can receive dividends in addition to salary. Alphabet shares can be used to provide flexibility over how dividends are allocated, but they must be set up correctly.

👋 How can we help

We advise on the best way to pay family members, set up payroll, create the right share structure and keep your business fully compliant while optimising tax efficiency.

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This Week’s Tax Tip 🌟: HMRC’s Tax Free Childcare Reminder – Are You Eligible? 👶💷

Working parents in the UK can claim up to £2,000 per child per year towards childcare costs through HMRC’s Tax Free Childcare scheme. If your child is disabled, this increases to £4,000 per year.

The scheme adds £2 for every £8 you pay into your childcare account, up to £500 every three months per child. That is free money towards nursery fees, registered nannies, after school clubs and holiday camps.

Here is what you need to know for the 2025 to 2026 tax year:

✅ Available for children under 12, or under 17 if disabled

✅ Open to employed and self-employed parents earning £183 per week

✅ Income must be under £100,000 per parent

✅ Use alongside 30 hours of free childcare in England

✅ Reconfirm eligibility every three months

You cannot use this scheme if you are receiving Universal Credit, childcare vouchers or Tax Credits. If you are eligible, make sure you open an account through GOV.UK and activate it before the end of the quarter so you do not miss out on the top up.

Far too many parents are missing out. Do not leave free childcare funding on the table.

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❓ FAQ of the Week: Can Property Losses be Offset Against Other Earnings? 🏠📉

This is a common question among landlords, especially when a rental property runs at a loss due to high mortgage interest, repairs or void periods.

So here’s the answer...

🚫 No – property losses cannot be offset against other income, such as your salary or self-employment profits.

Instead, any loss from your rental property is carried forward and can only be used to offset future profits from the same property business.

For example:

If you made a £2,000 loss in 2023/24, and £5,000 profit in 2024/25, you’ll only be taxed on £3,000 in 2024/25 after applying the carried-forward loss.

🧾 You must still declare the loss on your tax return to ensure it’s recognised and available to use in future years.

💡 Tip: If you have multiple properties under one rental business, the loss from one can offset profit from another – but only within that rental business. It doesn’t reduce other types of income.

👋 Not sure how to report or track your losses? We help landlords stay compliant and make the most of every available tax relief.

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This Week’s Tax Tip 🌟: Use a Trust to Protect Property and Plan for the Future 🏡📜

If you own property such as a buy-to-let, a holiday home or a growing portfolio, a trust can be a smart move for long-term tax planning and protecting family wealth. It is a practical tool that gives you control, flexibility and real tax-saving potential.

Here is why it works:

✅ Inheritance Tax Planning: Placing property into a discretionary trust can remove it from your estate after seven years, potentially saving 40 percent in inheritance tax. Making gifts now could save your family thousands later.

✅ Control and Flexibility: You decide who benefits and when. For example, children or grandchildren do not have to receive assets at 18. You retain control over distributions.

✅ Asset Protection: Trusts can shield property from divorce settlements, creditors or poor decisions by future generations. They add a layer of security that direct ownership cannot.

✅ Income Planning: Trusts can hold income-generating property and distribute income to beneficiaries who may pay tax at lower rates. This makes them an efficient tool for managing family income.

Trusts have their own tax rules and must be structured properly, but when done right they can preserve your legacy and reduce your tax bill. Professional advice is essential, but the long-term benefits can be significant.

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This Week’s Tax Tip 🌟: Claim £6 a Week for Working from Home No Receipts Needed! 🏠💼

If you're employed and work from home regularly, even just one or two days a week you could be entitled to claim £6 per week (£312 per year) in tax relief without needing to provide receipts 💷📉

This flat-rate claim covers additional household costs, such as heating, electricity, and internet, used while working 🙌

✅ No receipts required for the flat rate

✅ Higher-rate taxpayers can save up to £124.80 a year

✅ Claim retrospectively for up to four years if eligible

Increased flexibility shouldn't mean missing out on simple tax relief. Make sure you’re not leaving money on the table.

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❓FAQ of the Week: What’s changing with MTD for Income Tax and who needs to prepare? 💻📆

MTD for Income Tax is coming, and if you're a sole trader or landlord, it could mean a big change to how you report your income to HMRC.

🗓️ From April 2026, if your total income from self-employment and property exceeds £50,000, you’ll need to follow the new rules.

🗓️ From April 2027, the threshold drops to £30,000.

So, what does that mean in practice?

📲 Quarterly digital submissions to HMRC

🧾 Digital record keeping using compliant software

✅ An End of Period Statement and a final year-end declaration

Old-school spreadsheets or paper records won’t be enough.

This isn’t just extra admin. It’s a full shift in how you manage your finances. You’ll need to stay on top of your records throughout the year, but with the right systems, it can actually make your life easier.

🔍 Real-time visibility on your income

⏱️ Less stress at tax time

📈 Better data for business decisions

👋 Need help getting ready?

We support landlords and self-employed clients with the full MTD setup – from choosing the right software to managing your quarterly submissions. Get ahead now and avoid last-minute headaches.

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