Income shifting

Copyright © 2026 LexisNexis
Produced by a Tolley Personal Tax expert
Personal Tax
Guidance

Income shifting

Copyright © 2026 LexisNexis
Produced by a Tolley Personal Tax expert
Personal Tax
Guidance
imgtext

This guidance note considers how the settlements legislation can apply to income shifting, particularly as regards a family company.

Overview of the settlement provisions

A popular tax planning approach is to transfer income-producing assets between spouses or civil partners. This may be done where one pays income tax at a lower marginal rate than the other, or to ensure that personal allowances are used in full. Such arrangements are also known as ‘income splitting’ or ‘income shifting’. They have long been the subject of HMRC scrutiny.

The scope for tax saving is potentially greater with the introduction of the additional tax rate from 6 April 2010.

Inter-spousal / civil partner tax planning is assisted by the fact that for capital gains tax purposes, the transfer of income-producing assets should be a no-gain no-loss transfer. See the Inter-spouse transfer guidance note.

One aspect which has come under the spotlight is that such transfers may constitute a settlement. The settlement rules, as discussed below, are complex but they can result in income being taxed on the donor despite the

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
TAKE A FREE TRIAL NOW
Powered by Tolley+™
  • 13 Mar 2026 10:00

Home/ Tolley Tax Guidance/ Personal Tax / Family tax planning

Popular Articles

Owner-Managed Businesses

Trade or hobby

Trade or hobbyInteraction of hobby farming rules and commercialityFarming has its own set of ‘hobby farming rules’, which historically have stated that a profit must be made every six years. This is known as ‘the five-year rule’, in that there can be five years of losses but there must be a profit

14 Jul 2020 13:50 | Produced by Tolley Read more Read more
Corporation Tax

FRS 102 ― tax presentation and disclosures

FRS 102 ― tax presentation and disclosuresPresentation of tax under FRS 102An entity must present changes in a current tax liability (or asset) and changes in a deferred tax liability (or asset) as a tax expense (or income) unless the item creating the current or deferred tax amount is recognised in

14 Jul 2020 11:46 | Produced by Tolley in association with Steve Collings Read more Read more

Classes of NIC and who pays them

Classes of NIC and who pays themClass 1 NICClass 1 NIC is payable on earnings paid to an employed worker which derive from, or are treated as deriving from, an employed earner’s employment in the UK. There are two kinds of Class 1 NIC, primary contributions for which the employee is liable and

Read more Read more