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September Questions and Answers
Newsletter issue – September 2025
Q: My teenage child has a summer job this year. As they are under 18, do they need to worry about tax on what they earn?
A: Contrary to popular belief, children are eligible to pay tax just like adults. They rarely do because if they do earn anything, it is usually under the annual Personal Allowance of £12,570.
Some important things to note, though, are that under-18s should be paid a minimum of £7.55/hour and will need to pay National Insurance if earning over £242/week and aged 16+. Children (from age 14) can only work part-time until they are 18 (in England - it is 16 in Scotland, Wales and Northern Ireland). There are some exceptions, for example under-14s can work if they are performers or models.
Q: I have been cohabiting with my long-term partner for decades, but I've heard that could put us at a disadvantage when it comes to Inheritance Tax compared to couples who are married. Is this true?
A: Unfortunately, that is true. Married couples and civil partners get what is known as 'Spousal Relief'. This exemption means that when one partner dies, their entire estate can be left to the surviving partner without incurring any inheritance tax (IHT). Their personal nil-rate band (of £325k) also gets transferred, meaning when the surviving partner passes away, they can pass on £650k's worth of assets free of IHT.
If a primary residence is involved, the £175k residence nil-rate band also gets transferred, meaning the surviving partner will have an allowance of £350k if they pass the property onto direct descendants on their death.
Cohabiting partners are unable to benefit from this pooling of allowances, so there will likely be a larger IHT bill to pay when passing on assets upon their death.
Q: I'm in my early sixties and wondering if I should use my pension tax-free lump sum to pay off my mortgage?
A: This is a difficult question to answer, without having full knowledge of your financial situation. The main things to consider are:
The mortgage term and interest rate
The size of your pension pot and your retirement income need
If you believe that your pension investments will bear a lower return than your mortgage interest rate, then it would be worth clearing down your debt as your savings (pension) are growing at a slower rate than your costs (mortgage).
However, this reduces your pension pot which will affect long-term income. But you may prefer the peace of mind that you are mortgage free.
Please get in touch so that we can discuss your situation and explore the options available to you.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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