Should you make your children shareholders in your company?

5th May 2017 | Posted in: Allowances, Business Tax, Government Announcements, Pensions, Savings & Investments family shareholders

Make family members shareholders

The introduction of the £5,000 tax free dividend allowance has tempted many family company shareholders to give shares to other family members so that they can be paid £5,000 a year tax free. (Note that this allowance had been set to reduce to £2,000 from 6 April 2018 but this measure has been dropped from the Finance Bill 2017 due to the impending election. It may make an early return in the next Parliament depending on which party wins).

Such a strategy needs to be carefully structured as there can be Capital Gains Tax on the gift of shares, and HMRC may also seek to tax the dividend as employment income under certain circumstances. The dividend will also be taxed on the parents if received by a child who is a minor.

If you are considering giving shares to other family members and then paying dividends, please come and talk to us first.

If you feel we could help you and would like to discuss any of the above, please contact Anne Melville BA CA on 0131 317 7377 or email to anne.melville@jsca.co.uk.
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