10th July 2014
UK families could be using simple tax breaks to save for their children in the future, but many parents are not aware of how they could be saving on tax, says the Association of Chartered Certified Accountants (ACCA).
Many families who are attempting to save for their children’s future university education are not even aware of the possible ways to save money on tax. The ACCA points out that ensuring a secure future is important to most parents and this could be made easier by ensuring that everyone is aware of the tax breaks that can be used.
ACCA head of taxation Chas Roy-Chowdhury, said: “There are simple ways to reduce the amount of tax a parent is paying for their child, now it is important to make everyone aware of these. In many businesses parents are entitled to child care vouchers, whereby part of their pay is in the form of a voucher to be put towards childcare without tax being paid. The government is supporting this idea and in 2015 will be introducing a program in which a parent can spend up to £2000 per year on child care fees without being taxed.”
In addition, the ACCA found that many families are not aware of junior ISA’s, which give parents the ability to save up to £4,000 per year for their child without being taxed on the interest. With 6m children currently believed to be eligible for junior ISA’s the organisation points out this could be a convenient way for families to save for university education or other stages in later life, as the money cannot be touched until the age of 18.
“Families often do not like to think about the consequences of a family death, but preparing for this could save a considerable amount of money. Anything left to children in a will may cause an inheritance tax liability. To avoid this, parents can pass assets to their child before they die, ensuring that the child will receive the assets without it being subject to a hefty tax bill, giving the child a greater opportunity for financial security during their life,” added Roy-Chowdhury.