If you’re running a business and raising kids at the same time, you deserve a medal. It’s something I did for the best part of a decade and while it can be rewarding, it’s certainly not easy to balance the two. With Making Tax Digital for Income Tax nearing its launch, it might be another headache you have to deal with.
For business owners who are raising a family, it’s important to know about the fundamental recalibration that the UK tax landscape has undergone. The significant updates are something that may make your traditional tax system outdated and in need of an upgrade.
In this guide, we’ll look at how you can utilise strategies to make your tax system more efficient and aligned with the changes being made by HMRC.
Modern family business tax strategies to implement
To help make your mtd for self assessment process easier as you transition to the modern systems being put in place, here’s how you can modernise your family business tax for your benefit.
Hire your children
Ever thought of hiring your children as part of the business? Well, if your child is of an age where they need a job and experience, then hiring them into the business is only going to be a good thing for them.
Not only that, but it can benefit your business and provide tax benefits too. You can employ your children and deduct their wages as a legitimate business expense. Typically, the hiring age is from 13 years old.
Personal allowance
Each child will have a £12,570 tax-free personal allowance for the 2025/2026 tax year. This is helpful to know to ensure your child does or doesn’t pay tax.
NI Savings
By employing a child, you help a sole director qualify for the £10,500 Employment Allowance. That could end up saving you £1,136 in Employer National Insurance.
Understanding inheritance tax changes
Inheritance tax changes are something to be aware of, too, especially when you’re running a business and might want to explore passing on profits or the business itself to your loved ones.
From the 6th April 2026, the unlimited Business Property Relief (BPR) is being replaced by a capped system. This makes succession planning a vital part of your tax system and business in general.
The £2.5 million cap
The first £2.5 million of combined business and agricultural property receives 100% relief. Any value above that threshold will receive only 50% relief.
Trasnferability
The £2.5 million allowance is now transferable between spouses and civil partners, allowing the couple to protect up to £5 million in assets.
Trust planning
Assets that are transferred to a trust before 6th April 2026 may still be able to qualify for the old unlimited relief rules, though new caps will apply to any trusts established after this date.
If you’re running a business and raising kids at the same time, well done. It’s something that not everyone can do or has the opportunity to do. However, it’s good to be forward-thinking in your planning as well as making sure your tax system is modernised for your financial benefit now and in the future.
