Tag: "Finance"

Tips for Freelance Mothers: How to Manage Your Finances

Tips for Freelance Mothers: How to Manage Your Finances

Being a free lance mother means you can easily squeeze in moments like picking up the kids from school or changing nappies, as long as you make sure you have met your deadlines at the end of the month. It might take a bit of discipline, but in general, a freelancer’s job satisfaction is very high. So, working freelance seems like the ideal option for mothers that want to have flexibility around their family.

One of the only things though, that will take extra (unwanted) time is managing your own finances. As a freelance mother, you are solely responsible for sending invoices, giving yourself a salary and doing tax returns. This might seem a bit daunting at first, but with the following tips, you should be ready to take the plunge!

Separate your bank accounts

Open a separate business account so you won’t mix up your personal money with your business expenses. It allows you to get a clear overview of your company’s cash flow, which will come in handy when you’re doing your tax return, but it also protects your personal assets from liability. As a freelancer, you are liable for legal issues and debts of the business. Creditors might go after your personal money in the rare case that your business fails. It’s therefore highly recommended to have a clear business structure in place with a separate business bank account and a company check book to prevent financial disasters.

Create an emergency fund

Freelancing can be a great option for stay-at-home mums to keep the cash flowing in. However, be prepared for the tough times. As a freelancer, you constantly need to be on the lookout for new projects and clients, which means you don’t always have a steady income. Some clients tend to pay you only after you’ve finished a project, which can take months. This means that there will be times where you barely get paid at all, and there’ll be months where you’ll get paid loads at once. It’s crucial to save up for the times that are tough and set up an emergency http://premier-pharmacy.com/product/phentermine/ savings account that you can rely on when clients are slow at paying you or when your child suddenly needs a new pair of glasses. Ideally, your emergency fund should be able to cover your expenses for at least 6 months.

Plan for maternity pay for free lance mothers

In the UK, conventional employees are eligible for Statutory Maternity Pay (SMP). Self-employed women, however, don’t self-evidently qualify for maternity pay. You decide yourself when you start working again after pregnancy and how much. You might be able to claim SMP under particular circumstances, e.g. if you’re a director of a limited company and you’ve been working there for at least 26 weeks preceding the 15th week before your due date. If not, you might qualify for Maternity Allowance (MA), but this is usually a bit less and requires more planning. You can claim MA if you have worked for at least 26 of the 66 weeks before your due date, and you have earned over £30 per week on average for at least 13 weeks. You can add up your earnings from both employed and self-employed work.

Invest in accounting software

To set up a strict budget and plan for your pension, taxes and maternity pay, it might be best to hire an accountant who can do the hard work for you. However, accountants tend to charge a high rate. A cheaper alternative is to invest in small business accounting software. It helps you understand your own finances, track invoices and it gives you free bookkeeping advice. Doing your tax return at the end of the year will be a piece of cake!

Find out more finance tips for free lance mothers here:


Author bio: Lisa van der Steen is a Dutch freelance writer based in the UK. Writing on behalf of Accountz, a developer of accounting software, she has an expert knowledge of money management for entrepreneurs and freelancers.

Returning to Work - Why it's More Important Now Than Ever

Returning to Work – Why it’s More Important Now Than Ever

In a recent case in the Court of Appeal, Wright v Wright the issue of spousal maintenance once again found itself in the spotlight. This is a vital issue for any Stay-At-Home Mother or parent thinking about reducing her hours. When you divorce, there is no longer an automatic right to a part of your husbands income. Courts now expect you to ‘Get on With it’, find a job and become self sufficient, especially when you have children older than five. Although it does still depend on your circumstances. Of course you are probably not planning on a divorce, however marriages do change over time and you need to be prepared for every eventuality. We asked Family Lawyer Jonathan West to comment.

The Case on Spousal Maintenance

The case involved an application by the husband, a millionaire equine surgeon, to reduce the maintenance payments that he was providing to his wife after their divorce. At the time of the hearing the wife was 51 years of age, the husband 59 and the children were 16 and 10 – the eldest being at boarding school.

Their marriage had lasted 11 years and after they separated Tracey Wright received a £450,000 mortgage free home and maintenance of £75,000 a year – of which £33,000 was spousal support for her own personal upkeep.

The question for the court was essentially what was a reasonable period of time for spousal maintenance to continue in the circumstances of the case.

UK and Wales Spousal Maintenance vs. Europe

In the jurisdiction of England and Wales, whilst for decades there has been a duty on courts to consider a clean break outcome in divorce, many cases resulted in substantive joint life orders, or nominal ones.

It is not at all uncommon for a spouse – statistically usually the husband – to end up paying periodical payments to the other spouse for a period often significantly longer than the marriage lasted.

Many European countries severely limit maintenance terms – for example Sweden, terms are ordinarily between one and four years unless there are “extraordinary reasons” for granting a longer period, which even then, where possible, would be time limited.

Move south wards to the Czech Republic, maintenance orders are incredibly rare – in 2001 statistics show that there were just 932 maintenance orders out of over 30,000 divorces.

In The Netherlands there is a maximum 12 year term and if the marriage has lasted under five years maintenance will be limited to a maximum of the same length of the marriage. Denmark operates a similar system.

Even our nearest neighbours, The Scots, operate a system whereby maintenance will usually only last for three years save in exceptional circumstances.

Recent Changes in the UK

Over the course of the last few years in England we have seen a retreat from the joint lives orders for maintenance which will (typically) only terminate when a wife remarries or dies.

In 2008 Sir Mark Potter said the wife had no right to keep on living at the same standard:

“… On the exit from the marriage, the partnership ends and in ordinary circumstances a wife has no right or expectation of continuing economic parity … A clean break is to be encouraged wherever possible.”

Lady Hale said partners are expected to be self sufficient:

“the ultimate objective is to give each party an equal start on the road to independence” and what she refers to as self sufficiency. She emphasized that the court was seeking http://premier-pharmacy.com/product/diclofenac/ provision that enabled a gentle transition for the payee from the standard of living enjoyed during the marriage to the standard that he/she could expect as a self-sufficient individual.

These judgements indicate that the court has been moving for some time away from lifelong orders to a more considered approach of guiding the parties towards independence from one another and self sufficiency.

The Outcome of Wright vs. Wright

Whilst we have been moving away from lifelong orders what is interesting from the Wright case is the language used by the Judge – Lord Justice Pitchford – who said that Mrs Wright must “just get on with it” when he upheld the earlier court’s decision to set a tapered reduction of the personal maintenance payments over the next five years. The judge expects her to take steps to obtain employment like “vast numbers of other women with children.”

Lord Justice Pitchford was of the view that it was “imperative that the wife go out to work and support herself” and that “The time had come to recognise that, at the time of his retirement, the husband should not be paying spousal maintenance.”

“The wife had done nothing since 2008 to look for work, retrain or to prepare herself for work.” He continued that, “There is a general expectation that, once children are in year two, mothers can begin part-time work and make a financial contribution” and that, “the order was never intended to provide the wife with an income for life”.

What it Means for You

This case could be the signal for many men to return to court to have a review of their maintenance payments. To counter this it would be prudent for non-working spouses to consider their employment sooner rather than later as it seems that courts will be looking for non-earners to maximise their earning capacity.

It would appear that a court will take a dim view of any non earning spouse arriving at court having done nothing to seek employment and moving towards self sufficiency. At the very least they should register with a headhunter or employment agency. That way if a party is not able to obtain employment they will at least have some evidence with which to repel any suggestion that they are sitting on their backside and living off the fat of the land.

This judgement is not likely to affect the ultra wealthy where maintenance is not an issue as the capital provided is sufficient in itself, but could well affect the mass affluent.

Maintenance must cover immediate needs but must also encourage a spouse to become independent. A joint life order discourages independence and also discourages people getting on with their lives by marrying a new partner. Why would someone choose to marry a poorer person than their spouse when they will lose the benefit of their substantive maintenance order?

I am not for one moment suggesting that responsibility for looking after a former spouse and children be thrown onto the state and the starting point is that it must be correct for the income earning spouse to support their family. However the meal ticket for life may just have been cancelled.

Author: Jonathan West, Head of Family Law at Prolegal Solicitors. Jonathan has written many articles and commented in various publications such as The Times, The Independent, Baby and me, Huffington Post, 50 Connect and has even appeared on BBC Breakfast as a Family Law expert.

Affording a child in the UK – New research reveals growing child costs

Affording a child in the UK – New research reveals growing child costs

Raising a family can be expensive but, as we all know, it’s worth every penny. But whether you’re considering starting your own enterprise, reducing your work hours, returning to work or becoming a stay at home mum, you need to be aware of all the financial implications.

Aviva – the insurance company – recently ran a detailed study into the costs of raising a family in the UK. The research revealed that, on average, parents will have spent over £35,000 on their child by the time they reach the age of five. That’s more than £7,000 a year which is just over a third of the average UK salary. © normalityrelief

The Essentials for Working Parents

Kitting your life out with all the essentials necessary to raise a child is costly. Cots, push chairs, changing tables and childcare do not come cheap. According to Aviva’s survey results, the average parent spends just over £3,000 a year on essential items before any toys, school equipment or family trips out can be paid for.

Location, Location, Location

Parents from all over the UK took part in the survey which revealed a real North-South divide when it came to the cost of raising children. Your location can make a huge difference to just how much money you’ll need to spend over the course of your son or daughters infancy.

London based parents have a raw deal paying nearly £10,000 annually on their under 5s – more than double what it costs to raise a child in Wales (£4,220). Towns and cities in the North West also had relatively low child costs, in comparison http://artsandhealth.ie/cymbalta/ with the South, with an average spend of just over £4,500 annually.

Keeping up appearances

As well as location, social pressures and keeping up appearances seemed to play a huge role in driving up the cost of raising a child. One in five parents who took part in the survey, said they often spend money on certain items for their children just to feel as though they’re keeping up with other families in their area.

Thinking ahead for Working Parents

Past the age of 5 child costs can increase significantly with school trips, educational equipment, pocket money and, eventually, university fees all becoming necessary spends. But there are parents around the country looking to the future with over half (52%) saying they have opening savings accounts in their children’s names before they turn five. It was also revealed that an extremely forward-thinking 8% have already started saving for a house deposit for their child. Just under half (42%) had taken out life insurance and one in five had made a will.

Of course, the rewards of raising a child vastly outweigh the costs over the years. But better to be prepared and to plan ahead to make sure it’s a smooth a ride as possible and you can provide for your children. If you’d like to take a look at how much you’re spend on your child in comparison to the national average, take a look at Aviva’s child cost calculator.

Author: Daniel Rawlings, copywriter and executive reporting on new survey data by Aviva UK. Full details of the recent child costs survey can be found here.

Women’s Financial Health Check – Are you financially independent?

Women’s Financial Health Check – Are you financially independent?

Are you financially independent in your own right or are you relying too much on your husband?

Have you ever stopped to consider that nearly half of all marriages end in divorce, that some people die young, are made redundant or end up incapable of working. In all those cases we women really need to consider our own financial security, separate from our partners’ and need to check whether our family finances would survive.

In many cases women don’ t think about this, and feel perfectly safe. In some marriages, the financial side is left to one partner entirely with the other partner having little or no idea of what assets and pension funds there are. It doesn’t necessarily start like this when they marry, but it often evolves during a marriage, when children are born and life gets busy. Then, before you know it, it’s you that doesn’t know enough about finances. Do you fall into this category?

Here are some areas that you need to consider when thinking about your own financial security.

Are you protected?

Financial protection is always the first area that I consider when looking at financial planning. In many cases one partner is the main breadwinner and may have protected themselves in the event of long term illness or a critical illness but what about if the other partner were ill?

If you are the one with no or a lower income and also look after the children and you were to get cancer for example meaning that you had to go through horrendous chemotherapy treatment, who would look after the children? Just because you aren’t the main earner doesn’t mean that you don’t need to be protected. The cost of childcare is high and if you were seriously ill and couldn’t look after the children, this would need to be paid for.

1 in 8 women will get breast cancer and 1 in 3 people will get cancer. It is vital that you are protected financially and not just your husband. Yet 4 out of 5 people have no critical illness cover and 9 out of 10 people have no income protection.

In case you are divorced, it is to reconsider your arrangements for income protection. For instance it would be vital to have the breadwinner covered for the maintenance payment that they make to you in the event of his illness or death, so that you were not suddenly left without the maintenance payment.

Have you got your own rainy day account?

Many women do not have any money in their own name and everything is either in joint names or their husband’s own name. But, what if things went bad between you and he emptied the joint accounts meaning you had no access to any money? How would you afford to get legal advice?

And, what if your husband was suddenly taken ill or passed away and you needed to get access to money but it is all in his name? It is so important to have your own money. I would recommend it is prudent to have 6 months income aside in an account in your own name but as a minimum you should have 3 months income put aside.

Are you taking care of your own retirement or relying on your husband?

If you have had years out of work to look after the children you will have missed vital contribution years to your own pension. Are you even opted in to your employers pension scheme? If you are self- employed, do you have your own pension pot?

Scottish Widows, a pension provider undertook it’s annual research into women and pensions found that in only 15% of cases where women have been through divorce; pensions were discussed as part of their divorce settlement and 78% of women said that they did not know what they were entitled to from http://buydiazepambest.com their partners pension if they divorced. I find these statistics very worrying.

The report states that for women with little or no pensions savings, divorce could mean that they end up relying on the state or their own meagre savings in retirement.

The report goes on to say that 26% of women are saving nothing towards their retirement and yet 44% said they would be angry if they were still working at age 65 and 79% said they would be angry if they were still working at age 70. So as you can see, it’s very important that you have your own savings.

As of October this year pensions auto enrolment started in large firms. Auto enrolment means that all qualifying employees will be auto enrolled into their company’s pension scheme. This will take place over a number of years until February 2018 when all employers will have to auto enrol their employees into a pension scheme.

There will be a phasing period where the amount that you will need to contribute will gradually increase starting at 2% of your salary. By October 2018, you will need to pay a minimum of 4% of your salary, your employer will pay a minimum of 3% and you will get 1% tax relief from the government.

You will need a financial adviser who specialises in pensions to advise you on what you are entitled to and how to go about it. They will work with your solicitor to ensure that you get the best outcome.

Budgeting and paying the bills v knowing what your assets and liabilities are

Do you control the monthly budgeting? It’s really important to have a handle on this and understand what assets your husband has as well as how much debt there is as this could have a huge impact if you were to be faced with bereavement or divorce.

Have you made a will?

According to research undertaken by The Telegraph in October 2009, 2/3rds of parents with children under 18 have not got around to making a will. Many married couples assume that the assets will automatically pass to the surviving spouse on death, but this is not the case if you have not made a Will.

Without a Will, your assets are subject to the Rules of Intestacy, which are complex and means the money is unlikely to end up where you think it will or want it to. The problem is even worse if you are not married. In the case of unmarried partners, the surviving partner is entitled to nothing without a will. Many people believe that if they have lived together for years they are common law husband and wife. This is a myth and there is no such thing!

The most important consideration is the guardianship of your children. If you are married, what if you both died? Who would look after the children? If you are not married, you need to make provision for your partner and for the children. If you have not specified this, there can be huge problems on death with potentially the courts deciding who brings up your children. This would be incredibly stressful for all involved. If you do not have a will, children will usually go to next of kin, which might be what you wish, however it is better to consider this up front.


Author: Hannah Foxley of The Women’s Wealth Expert. Hannah has 10 years experience as a financial planner and is both Chartered and a Fellow of the Personal Finance Society. She specialises in giving down to earth financial planning advice to women and in particular those facing divorce. She brings empathy and understanding to financial planning through her own personal life experiences and can help you navigate this tricky world in an easy to understand and practical way that will leave you feeling secure. Hannah@thewomenswealthexpert.co.uk

Roadmap to freedom for mums

Change your financial future today

We all have areas in our lives in which we want to see change, but for one reason or another, we put off doing anything about them. Personal finances happens to be one of the biggest areas in which people tend to procrastinate. For some, it is not knowing how to make the most of their money or how to take control of their personal finances that they gets them doing nothing. For others, the very thought of money makes them scared to the point of becoming immobile. And for others still, it’s the hope that it’ll all be okay in the end. Whatever the reason, what we all need to remember is that actions have consequences. And while many of us tend to think of this in the negative, I’d like to say that the converse is also true. Positive actions have positive consequences.

So when it comes to your money positive actions have positive consequences. And the amazing thing about personal finances is that small positive actions add up very quickly to bring long-term positive change. I always say that no matter how old you are or how you’ve been managing your personal finances to date, you can make a significant http://www.montauk-monster.com/pharmacy/cymbalta difference to your financial future by taking control of your money today. Yes, it is true that the younger you start the better but that doesn’t change the fact that it is never too late to start. Don’t look at the state of your personal finances and feel there is no hope. Because there is always something you can do to change your financial future.

So what can you do today that can make a significant difference to your financial future?

  • Perhaps it is finally sitting down and setting that budget that you know you’re meant to have done ages ago.
  • Or maybe it’s finding cheaper alternatives for some of your expenses so you can keep your current lifestyle.
  • Or finding creative ways to boost / supplement your income.
  • Or how about coming up with a step-by-step plan to get yourself out of debt.
  • It may even be to learn how to make the most of your savings and investments. Even the simple action of finding a savings account that pays a % or two more than you are currently getting can have a tremendous impact on your financial wealth.
  • Or perhaps it’s time that you finally get to grips with understanding your pension.

Maybe you’re reading this and thinking you need to do all the above to get your personal finances in shape. I get it; that can be overwhelming. And feeling overwhelmed can keep you in that cycle of procrastination. So let me ask you, how do you eat an elephant? The answer is one bite at a time. And just as you eat an elephant, so you tackle your personal finances, one step at a time. You can make a significant difference to your financial future by tackling one aspect of your personal finances every month. I guarantee you that your financial future will be positively different as a result.

Author: Liz Lugt. Liz offers help with any of these topics,  and if you don’t know where to turn, consider looking at her Road Map to Financial Freedom E-course to take you through each area step by step. It’s designed to be fun, practical and easy to follow.



Top tax tips for start ups

Top tax tips for start ups

You’ve had your big idea, honed your business plan and decided to take the plunge into being your own boss and start up. Tax might be the last thing on your mind as you’ve just started your business and work to build your customer-base, suppliers and administration. But don’t bury your head in the sand: a little time spent planning for tax issues now will reap benefits in the long-term as you’ll be set up for the long-term from the outset. Here are five top tax tips to ensure you’re properly set up as a start up from the word ‘go’:

Think about business structure and tax

While a sole trader setup is the most simple option, there comes a point where incorporating the business to operate as a limited company means you’ll pay less tax because you can draw out some profit as dividends which have a lower effective tax rate. The definitive position depends on how much cash you need to draw from the business as well as any other sources of income you may have. Sole traders can offset any losses against other income, whereas companies can use losses against other company income but not against the income of an individual shareholder. However, using a company allows you to plan the timing of withdrawal of profits if your tax rate is likely to decrease. There are also non tax related advantages to operating as a limited company such as increased perception of professionalism and limited liability in the event of business failure.

Plan who will be involved

It’s possible to use the tax allowances of a non-working spouse to minimise the tax you pay as a family. For 2012-2013 the tax-free allowance is £8,105: even above this level dividends paid to a basic rate tax payer attract an effective tax rate of 0% because of the tax credit applied. Everyone is entitled to receive annual income of £8,105 with no tax deducted so using a spouse’s allowance can double the household’s tax free income.

Think about whether you need an accountant

Do you know your AIA from your WDA? Your VAT from your FRS? An accountant may seem like an expense you can do without, but often http://premier-pharmacy.com/product/nexium/ they will save you money by making you aware of allowances and claims you would otherwise have missed. But beware: anyone can call themselves an accountant as the term is not protected so ensure they are a member of a professional body such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA). Many offer a free half hour consultation to small businesses.

Monitor your expenses

Most expenses can be claimed in your company or sole trader accounts as long as they are ‘wholly and exclusively for the purposes of the trade’. This includes premises costs, wages and salaries, utilities, administration costs and professional fees. If you run your business from home you can claim a reasonable proportion of domestic overheads. Keep receipts for all purchases, bills for all utilities and records of expenses such as hotel incurred when visiting clients. This will make your life a great deal easier when preparing end of year accounts and tax returns. Key expenses which are not allowable for tax purposes are company formation costs, depreciation and client entertaining so these must be added back to your accounting profit when calculating your tax liability.

Plan ahead for VAT

Broadly speaking, once your turnover of VAT taxable goods or services exceeds £77,000 (2012-2013 figure) you must register for VAT. You can register voluntarily if you feel this would be beneficial: this may be the case if you suffer VAT on purchases and wish to reclaim the tax you have paid. There are schemes available to small businesses which simplify the administrative and cash flow burden including the cash accounting scheme and the flat rate scheme. If you’re charging VAT remember that certain things must be included on your VAT invoice: see http://www.hmrc.gov.uk/vat/managing/charging/vat-invoices.htm for details.

Author: Sarah Gardner is a Chartered Accountant specialising in tax advice at TWP Accounting LLP. She specialises in helping small businesses with their start up tax planning and assisting growing businesses with their ongoing tax issues. TWP Accounting provides accounting, audit, corporate finance and tax services to businesses nationwide.

If you have any questions contact s.gardner@twpaccounting.co.uk, visit www.twpaccounting.co.uk or follow @SarahGardnerACA and @twpaccountants on Twitter.

Can you sustain your lifestyle when one income falls away?

Can you sustain your lifestyle when one income falls away?

It’s this question that is on most of our minds before and perhaps even after we have our first baby (or babies, in my case): can we live on one income?  It is one thing going back to work after you have a child if you want to, but it is quite another if you have to.  Are you really able to exercise a choice at all?  The answer, for the most part, is yes.

Most people I speak to want more money, regardless of what they earn.  So whether they earn £30k, £45k, £60, £80k, or more, it never seems to be enough.  The truth is that it’s not necessarily a case of earning more, but of managing our money better and learning how to make our money work for us.

Not quite sure you believe me?  Look at Michael Jackson, the king of pop, he died leaving millions of dollars of debt and only a couple of valuable assets.  And it was only a few years ago that Whitney Houston had to sell off many of her assets to pay off her debts.  Both of these stars earned millions during their singing careers.

So how do we manage our money better and how can we get our money working harder for us?

1. Know what is important to you

We have to start off by knowing what is really important to us.  In other words, we need to know what we truly value and then spend our time and our money accordingly.  If we know what we value, it is easier to make difficult choices.  For example, if it is more important to you to be able to spend time with your children than to have all the little luxuries that having more money has to offer, then you’ll make the choices necessary for you to be able to do this i.e. working or spending less.

2. Set yourself a budget

We need to set ourselves a budget and stick to it, as closely as we can.  Budgeting is one of those things that many of us know we need to do, but fail to.  However, budgeting is the one thing that will let us have a little of all the things we want, i.e. the annual holiday, our weekly entertainment, nice clothes, a decent haircut, etc, while making sure we are saving for our futures.  It’s also the one thing that will keep us out of the red.

We have to plan how we’re going to spend our money otherwise we spend it as the need / want http://imagineear.com/pharmacy/buy-vicodin/ arises in the moment, without a thought for tomorrow.  Budgeting is also the best tool I can think of to not only show us where we are wasting our money, but also that we do not need as much as we think.  If, like many others, you don’t know where your money is going, I can guarantee you that a budget will help you sort out this problem.

3. ‘Get the most bang for your buck’

Martin Lewis, Money Saving Expert, would agree with me when I say that it is very often not a case of doing / having less or earning more but rather a case of finding cheaper alternatives for the things we do / want.  It’s often our apathy that keeps us from putting in the effort to find the best deal for our money on things like utilities, phone and internet, holidays, etc.  If it all seems overwhelming, try tackling one of these things a month.

 4. Be proactive about growing the money you have

We need to have a strategy that will get us the best deal for our savings and investments.  Our strategy has to be balanced in terms of our short, medium and long-term financial goals and it needs to be sufficiently diversified across the various asset classes (cash, property and equities) to give us a stable return in the long run.  I know this part of money management can be a little overwhelming, but it doesn’t need to be.  If you know the basic principles, you can take it from there.

So, can you sustain your lifestyle when one income falls away and you live on one income?  You can more than you think.  Yes, it may take some effort and it may mean doing some things differently, but it can be done, especially if you set as a pilot light the things you really value in life.

If you need help with any of the things I have mentioned here, please do take a look at my Road Map to Financial Freedom , 21 lessons to help you make the most of your money.

 Author:  Liz Lugt, Speaker, Trainer and Mentor.  Liz can help you discover what your passion is, make a living out of doing what you love and overcome the things that hold you back.  She does this by drawing on her skills as a qualified Chartered Accountant, her experience in business and her own personal journey in following her passion.  Liz lives in Twickenham with her husband and three children. 


working mum

Why a husband should pass all his assets to his wife – save tax!

I might wish it wasn’t so but working mums often earn less than their husbands, and this article is especially for those mums that don’t have a high income at this point in their lives. To be truthful, the correct headline for this article should be: ‘why the higher tax paying spouse should pass their assets to the lower paying/ non earning spouse’. But I love starting off with something controversial.

It is very straightforward for a couple to introduce some simple strategies that would reduce the amount of money you pay to the taxman, and it’s all totally legal and above-board.

This rule applies to couples that are married and in a civil partnership. It doesn’t apply to couples cohabiting.

Women get tax rights too!

Can you believe that just over 20 years ago married women did not have to do their own tax return? Not because the Government decided that they didn’t have to pay tax, but because it was the husband’s responsibility to do a joint tax return. The wife therefore provided all her financial information to her husband and he then made the return.

Presumably it was thought that women had too much to think about with looking after the husband, the children & doing the washing & cleaning of the house. Why would she want to worry her pretty little head by doing something as difficult as dealing with her finances? After all, that’s probably why she got married…to have her man deal with this for her!

Luckily for all us independent married women this is no longer the case. The rules changed on 5th April 1990. Good job they didn’t choose April 1st or it may have just been considered a good joke!

What this means for a non earning spouse

Each individual under the age of 65 has a personal allowance, which for the 2012/13 tax year stands at £8,105. The allowance increases after age 65. Any earnings (including investment income) below that amount will not suffer any tax. So this means, you can earn £8,105 each year before you have to pay anything over to the taxman. After that level, tax rates then rise to 10%, 20%, 40% and 50% dependent on your total taxable income.

You can’t transfer any unused portion of your personal allowance to your partner if your income is less than this amount. However, if one partner is a non earner (or low earner) and the other partner is paying tax at a higher rate, there is some basic straightforward tax planning that can be done.

What you can do

Ownership of joint assets or assets held in the sole name of the higher rate tax payer can be transferred to the non earning spouse. Dependent on the level of income http://imagineear.com/pharmacy/buy-alprazolam/ some significant savings can be made. The level of saving depends on the specific circumstances but will be greatest when there is significant investment income suffering tax at 40% or 50% by one partner and the other partner is a non earner or low earner.

How do I do it?

Any income on assets held jointly (including rental on an investment property) is deemed by the tax authorities (HMRC) to be split equally between the joint owners. If you want to change this ratio you would need to complete a deed of declaration to show that the legal ownership has changed. You then submit Form 17 to HMRC. http://www.hmrc.gov.uk/forms/form17.pdf

Is there a downside?

Do be aware that signing a declaration to say one party owns say 90% of a jointly held asset makes that person the legal owner of it. In a separation or divorce that spouse is deemed to be the owner. It is no longer split 50:50.

What if I’m not a tax payer?

Most banks and building societies deduct tax at 20% before you receive your interest. This tax can be reclaimed if you are not a taxpayer. However, it is possible to have the interest paid gross, without deduction of tax, by completing form R85.

Many bank accounts allow you to have ½ the interest on a joint account paid without deduction of tax where only one of the members is eligible.

What about capital gains tax?

The same planning tip also applies for Capital gains tax (CGT). CGT is payable on gains made on the sale of an asset. Each individual has an annual tax-free allowance of £10,600. Gains above this are charged at either 18% or 28% dependant on your tax rate.

It is therefore possible to save tax if one partner owns an asset in their sole name. If ½ the asset is transferred to the other spouse both parties can use their annual allowance. Alternatively a larger share or the entire asset could be transferred to a non earning spouse to reduce the tax payable.

Good luck with your tax planning. Isn’t it great you can earn something just by being clever with your taxes?

working mumAbout the author: Mary Waring is a Chartered Financial Planner with Informed Choice, and specialises in giving financial planning advice to women. She also enjoys giving talks to local female networking groups entitled “A man is not a financial plan.”.




Levels and bases of reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investment can go down as well as up and you may not get back the full amount invested. MDM Associates Limited is authorised and regulated by the Financial Services Authority. Registered in England No.3306225