Basic taxation

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4. Income tax - keeping it in the family

Most families are not tax efficient because their combined wealth - both in terms of earned income and assets - tends to be concentrated in the hands of the main breadwinner. He or she, therefore, is also responsible for paying most of the tax, usually at the top rate.

Make use of the non-working or lower-earning spouse's allowance and, where the income exceeds the personal allowance, the lower and basic tax rates. The two most common redistribution techniques are to give income-generating assets to your spouse and, where you run your own business, to pay your spouse a salary.

It is also possible to give income producing assets to children who can make use of their own allowances and, where necessary, their lower and basic rates of taxation. However, this requires great care. If you give this type of asset to your children and the income exceeds £100 per annum, you, as the parents, will be taxed on the entire amount. The use of a special trust can avoid this problem but do seek advice on this.

Finally, remember that if you give a gift of assets this has to be unconditional otherwise the Revenue will see through the arrangement and continue to tax you on the asset's value. Think carefully before you give your favourite shares to your spouse or children!

1. Your tax breaks courtesy of the government 2. Keep it legal 3. Income tax - first principles 4. Income tax - keeping it in the family 5. Capital gains tax (CGT) 6. How to avoid CGT on your share portfolio 7. Inheritance tax (IHT) planning 8. The most popular tax efficient investments 9. The tax treatment of collective funds 10. Tax efficient but may be very risky 11. Self assessment - who needs it? 12. Self assessment - key dates 13. Do you need an adviser? 14. Conclusion