Taxes at your life stage: in your 30s and 40s
As your income starts to increase, make sure you remain tax-efficient. Keep up-to-date with pension rules and start to consider how you might want to arrange a pension if you don’t already have one. While it might sound a little odd that we suggest planning for retirement this early on, it’s a really good idea to start early. We’ve written a guide on retirement planning that you can read here. While you only pay tax on a pension when you take money from the ‘pension pot’, you should start to factor it into your plans now.
Married and civil partnership couples
The big change here is the married couple allowance. As a rule, to qualify for this tax break:
- You need to be married or in a civil partnership. You can’t just be living together.
- One of you needs to be a non-taxpayer. This usually means you’ll earn less than the £12,570 personal allowance between 6 April 2021 and 5 April 2022.
- The other partner needs to be a basic 20% rate taxpayer. So that means earning less than £50,270, or if you live in Scotland, £43,662. Higher or additional-rate taxpayers can’t claim this allowance.
- You both need a birth date on or after 6 April 1935 (one of the less taxing requirements!).
If you feel you might start a family, then starting to plan on how you might save for your child’s future is a great idea.
Married with children
Having children allows you to claim child benefits. This is a non-means-tested benefit for each child. There are two separate amounts, with a higher amount for your eldest (or only) child. Currently, you get £21.15 a week for your eldest child and £14.00 a week for each of your other children. If either of the parents has an income over £50,000 you might be liable for a high income child benefit charge, which will effectively reduce the amount.
You can claim, entirely separately to child benefit, a child tax credit. You must already be claiming a Working Tax Credit. You can use the Tax Credit calculator on the HMRC site to help with this.
As well as the blind person’s allowance that we’ve already mentioned, those caring for disabled children can claim a disability element of child tax credit, normally £65.94 per child who qualifies. You should also check with your local council if you can claim some council tax relief due your child’s disabilities. This also applies to disabled adults living in a property, whether they are your children or not.
People who are self-employed
If you’re self-employed then it’s time to start looking at how you plan to exit the business. Feel free to take a look at our Business Exit Planning guide for detailed information on that.
Whether you do or don’t have children as well as keeping retirement in mind, it’s also worth considering care plans as you get older. Making sure you’ll get the life you want after your working life is over can be a huge weight off your shoulders.