Tax planning is not just an individual matter — families often benefit from careful consideration of how income, assets, and allowances are shared among family members. Thoughtful planning can reduce overall tax liabilities and help you achieve your financial goals more efficiently.
Family members commonly have differing income levels, savings, and allowance usage. Without planning, tax charges can be higher than necessary. By understanding how tax rules apply to families, you can:
Make better use of personal allowances
Reduce overall income tax bills
Preserve tax-free allowances and reliefs
Improve estate and inheritance tax outcomes
Each individual has a personal allowance, which is the amount of income they can earn tax-free each year. For the 2025/26 tax year, this allowance remains an important planning tool.
If one partner has unused personal allowance or savings allowances, transferring income-producing assets to them can reduce the family’s overall tax liability.
Care must be taken: income must genuinely belong to the spouse or partner receiving it to satisfy HMRC rules.
Savings and dividend income receive tax relief through separate allowances different from employment or trading income.
Basic rate taxpayers have a savings allowance
Higher rate taxpayers have a smaller allowance
Additional rate taxpayers may have no savings allowance
Dividend income from shares receives a tax-free allowance, and rates on dividends above the allowance are generally lower than on earned income.
Proper allocation of investment income among family members can improve tax efficiency.
In some circumstances, a spouse or civil partner with unused personal allowance may transfer part of that allowance to their partner, reducing the overall tax bill. This is called the Marriage Allowance.
Eligibility conditions apply, and careful planning may make this relief worthwhile for certain families.
Families with children may receive tax-related benefits and allowances, including:
Child Benefit (subject to the High Income Child Benefit Charge)
Child-related tax credits (if still applicable)
Savings and investment strategies for minors
Where children have income from savings or investments, it is important to be aware of the ‘parental settlement rules’, which may tax income at the parent’s rate if income is shifted purely for tax reasons.
Property owned jointly by spouses or family members can generate rental income and capital gains.
Each co-owner is usually taxed on their share of rental profits. Structuring property ownership appropriately helps ensure each party maximises their tax allowances.
When a property is sold, capital gains tax may apply. Main residence relief or letting relief may reduce the taxable gain, and joint ownership can allow both owners to use their annual exemptions.
Inheritance Tax (IHT) can be significant on the transfer of wealth at death or on certain lifetime gifts. Some key considerations include:
Nil rate band — the basic IHT allowance
Residence nil rate band — additional allowance when passing a home to descendants
Gifts in life — may reduce the taxable estate if planned carefully
Spouses and civil partners usually transfer assets between themselves tax-free, but planning ensures the most efficient use of allowances and reliefs.
Trusts can be used to manage family assets, protect wealth, or provide for children or vulnerable relatives. Trusts may have complex tax consequences, including:
Income tax on trust income
Inheritance tax charges on transfers into trust
Periodic and exit charges
Professional advice is important before establishing or moving assets into a trust structure.
Accurate records underpin good family tax planning. Documentation should support:
Division of income
Ownership shares in investments and property
Gift and transfer histories
Tax relief claims
Good records minimise the risk of HMRC enquiries and help ensure smooth compliance.
Family tax planning is about understanding the full picture — income, allowances, assets, liabilities and long-term goals.
Applegrow can assist you with:
Reviewing family income and allowances
Planning transfers of income and assets
Advising on savings and investment tax strategies
Inheritance tax and wealth transfer planning
Property ownership and rental income tax
Trust advice and compliance support
By structuring your family finances tax-efficiently, you can protect wealth and create greater financial certainty for the future.
A capital gain arises when a chargeable asset is sold for more than its original cost. The gain is calculated as:
Sale proceeds (less selling costs)
minus
Purchase price (including acquisition costs)
CGT applies to assets such as shares, business assets, investment property, and certain personal possessions.
For the 2025/26 tax year, CGT rates depend on your total taxable income and gains:
18% on gains that fall within the basic rate income tax band
24% on gains above the basic rate band
These rates apply to most assets, subject to specific exceptions and reliefs.
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can significantly reduce CGT on qualifying business disposals.
For 2025/26:
Qualifying gains are taxed at an effective rate of 14%
The lifetime limit for BADR is £1 million
The rate will increase to 18% from 2026/27
BADR may apply to:
The sale of a sole trade or partnership business
Shares in a personal trading company
Assets used in a business that has ceased within the last three years
Associated disposals (such as personally owned property used in a business) may also qualify, although restrictions can apply, particularly where rent has been charged.
To qualify for BADR on company shares:
You must have been an employee or director
You must hold at least 5% of ordinary share capital
You must hold at least 5% of voting rights
Additional distribution or proceeds tests must be met
The qualifying ownership period is two years leading up to the date of disposal.
Where a shareholder’s holding falls below 5% due to fundraising through new share issues, BADR may still be protected. An election can be made to crystallise the gain before dilution, with the option to defer tax until the shares are actually sold.
This area requires careful planning.
Investors’ Relief is designed for external investors in unlisted trading companies.
Key conditions include:
Shares must be newly issued for cash
The company must be unlisted and trading
Shares must be held for at least three years
The CGT rate under Investors’ Relief is:
14% for 2025/26
Increasing to 18% from 2026/27
The lifetime limit for IR is £1 million.
Each individual can realise gains up to the £3,000 annual exemption (2025/26) without paying CGT. Couples should consider planning disposals jointly to maximise the use of both exemptions.
Shares of the same class in the same company are treated as one pooled asset. However:
Same-day transactions are matched first
Purchases within 30 days after disposal are matched next
Remaining shares are matched from the pooled holding
These rules are designed to prevent short-term tax planning.
Additional reliefs may include:
Private Residence Relief
Business Asset Rollover Relief
Gift Holdover Relief
Offset of carried-forward capital losses
Some disposals, such as those involving EIS, VCTs, or share exchanges, can be complex and should be reviewed in advance.
Capital gains tax planning should always be done before an asset is sold. Early advice can significantly reduce tax exposure and avoid unexpected liabilities.
Applegrow can help you:
Identify available CGT reliefs
Plan business or investment disposals
Structure transactions tax-efficiently
Ensure compliance with current legislation
Contact Applegrow Financial Advisors today for tailored guidance on family tax planning and long-term wealth management.
