With the summer holidays around the corner and COVID-19 putting off most people from going abroad, how can you occupy your teenage kids over the six-week break?

Sure, they could become couch potatoes and watch Test match cricket, the Tour de France, or even England lift the Euro 2020 trophy. Alternatively, if you own a business, you can claim a tax break for putting them to work.

Employing your children within your business can be an effective way to give them cash, while reducing your tax bill and teaching them a work ethic that should stand them in good stead later on in life.

Labour laws

Teenagers can start working part-time from the age of 13, unless you own a business involved in television, theatre or modelling, in which case a performance licence will be required.

During the school holidays, 13 and 14-year-olds can work up to a maximum of 25 hours a week for your business, including up to five hours on Saturdays and two hours on Sundays.

For 15 and 16-year-olds, they can work a maximum of 35 hours a week over the school holidays, including up to eight hours on Saturdays and two hours on Sundays.

If your child is leaving school next month at the age of 16 or above, they can start working full-time in your business if they want to. They might need to be paid via PAYE and at least £4.62 an hour in 2021/22 .

Tax incentives

If you run a company, paying your children to work in your business this summer will reduce your taxable profits. That might sound like a bad thing, but it will have a domino effect on lowering your corporation tax bill.

If you’re self-employed, you can claim allowable expenses for any wages you pay your children. That means it’s possible to reclaim whatever you pay them this summer.

You need to record what you pay your children this summer if you want to claim back their wages as an allowable expense. This will form part of your 2021/22 tax return, which is due on or before midnight on 31 January 2023.

For your teenage children, they are entitled to the £12,570 personal allowance in 2021/22 but are also highly unlikely to get anywhere near breaching it which means their income this summer will be tax-free.

How I can help

If you’re considering taking on your teenage child in your business this summer, I can run you through your potential obligations and offer tax-planning advice to ensure it works for you and your child. Call me on 07803 782100 or email me on jon@red76tax.com and I’ll be happy to help.