Can my limited company help my children? Practical ideas from Coalesco Certified Accountants without income shifting

Practical ways a family company can support the next generation through genuine work, training and benefits, without simply shifting income.

Running a family business often makes you wonder whether the company can help your children as well as you.
The answer can be yes. A child who genuinely works in the business can be paid. An older child with a proper role might receive an electric company car. The company may be able to contribute to a pension, pay for relevant training or provide the equipment needed for the job.

The important point is that these arrangements must be real and commercial. Your company cannot simply redirect profit to a child because they have unused tax allowances. The payment or benefit should relate to actual work, responsibilities or the long-term needs of the business.

This guide uses 2026/27 figures and looks at some practical possibilities without becoming too technical.

Start with the commercial question
Before considering tax, ask a simple question: would the company pay an unrelated person this amount for this work or provide them with this benefit as part of the same role?

If the answer is yes, you are starting from a sensible position. If the arrangement only makes sense because the employee is your child, it needs much more care.

Good records matter. Keep a job description, timesheets, evidence of the work, a suitable employment contract and proof that wages were paid into the child’s own bank account. Follow the same payroll and employment processes you would use for anybody else.

It is also important to distinguish between:
– A school-age child doing a few genuine hours of simple work
– A 16 or 17-year-old with National Minimum Wage and working-time rights
– An adult child who has a substantial role in the business

The right answer will be different in each case.

Idea one: pay a reasonable wage for genuine work
A limited company can employ the director’s child. The wage should reflect the work actually performed, the time spent and the child’s experience.

Suitable tasks might include:
– Scanning and filing documents
– Updating a customer database
– Preparing post or stock packs
– Taking simple product photographs
– Helping with social media under supervision
– Basic data entry or website checks
– Cleaning a workshop or office
-Assisting at events

The task must be real. A vague claim that a child helps out sometimes is not enough to support a regular salary.

Example: a 17-year-old working eight hours each week
Assume your 17-year-old works eight hours each week doing database updates and preparing customer information. From 1 April 2026, the National Minimum Wage for a worker under 18 but above compulsory school age is £8 per hour.

Calculation
Amount
Hours each week -8
Hourly rate – £8.00
Weekly pay – £64.00
Annual pay for 52 weeks – £3,328.00
Income Tax, assuming no other income – £0.00
Employee’s National Insurance – £0.00
Employer’s National Insurance – £0.00
Potential Corporation Tax saving at 19% – £632.32

The child receives £3,328. The company may obtain Corporation Tax relief if the cost is incurred wholly and exclusively for the business. Because the employee is under 21, the employer’s National Insurance rate is normally 0% on earnings up to the under-21 threshold of £50,270 for 2026/27.

This does not mean every child should automatically be paid £3,328—or £12,570 simply because that is the Personal Allowance. If the work is worth £1,500, paying £12,570 is difficult to justify.

What about a child under 16?
School-age children are not normally entitled to the National Minimum Wage and do not pay National Insurance. That does not give a company freedom to choose an artificial wage. Pay should still be reasonable for the work.
Child-employment rules are separate from tax. Depending on age and location, there may be restrictions on permitted work, hours, breaks and working times, and a permit from the local council may be required. Children can generally work part-time from age 14, or from 13 in some council areas. Always check the rules with the child’s local council before they start.

Idea two: provide an electric car to an older child with a genuine role
An electric company car can be a tax-efficient part of a remuneration package. This is most likely to be appropriate for an adult child, or possibly an older young worker, who has a proper job and genuinely needs or is commercially rewarded with a car.
For 2026/27, a fully electric car with zero CO2 emissions has a taxable benefit based on 5% of its list price. The company normally pays Class 1A National Insurance at 15% on that benefit.

Example: an adult child working as operations manager
Suppose your 24-year-old child works full-time as the company’s operations manager. They are paid a market salary and receive a new fully electric car with a list price of £35,000.


2026/27 electric-car calculation
Amount
Car list price – £35,000.00
Taxable benefit at 5% – £1,750.00
Income Tax at 20%, if basic-rate taxpayer – £350.00
Income Tax at 40%, if higher-rate taxpayer – £700.00
Company’s Class 1A NIC at 15% – £262.50

The tax is based on the car’s list price, not the monthly lease payment or the amount paid for a used car. The company will also have to report or payroll the benefit correctly.

The company may receive tax relief for qualifying lease costs or capital allowances if it purchases the vehicle, subject to the normal rules. Insurance, charging, maintenance and private use all need to be considered.

Why the job still matters
Providing a £35,000 car to an adult child who manages operations may form part of a credible employment package. Providing the same car to a teenager doing two hours of filing each week is much harder to defend as a business cost.

This is not “income shifting”. A company car is taxable remuneration for an employee. The employee has a real role, receives a real benefit and pays the resulting tax. The difficulty arises where the benefit is excessive for the work or is clearly driven by the parent’s private wish to fund the child’s motoring.

Practical issues can be just as important as tax. Check that the child can be insured, that the finance or lease agreement permits them to drive and that any age restrictions are satisfied. The benefit normally begins when the car is available for private use, not only when it is driven.

Idea three: make a pension contribution
Starting a pension early gives investment growth a long time to compound. There are two main approaches.

A personal or Junior SIPP contribution
A person with no earnings can normally contribute £2,880 net to a relief-at-source pension, with the pension provider claiming £720 from HMRC. This creates a gross contribution of £3,600.
That payment can be funded by a parent or grandparent. It is not a company expense and does not reduce the company’s Corporation Tax bill.

An employer pension contribution
Where the child genuinely works for the company, the company may consider an employer contribution. It should form part of a commercially reasonable remuneration package when salary, benefits, hours and responsibilities are considered together.
For example, the company might pay £100 each month into the pension of an adult child employed in the business:


Employer pension example
Amount
Monthly company contribution – £100.00
Annual amount invested – £1,200.00
Potential Corporation Tax saving at 19% – £228.00
Immediate Income Tax for the employee – Normally £0.00

Employer contributions are not limited to the employee’s earnings in the same way as personal contributions, but annual allowance rules and the “wholly and exclusively” test still matter. A very large contribution for a minor role could be challenged as excessive remuneration.

Idea four: provide the tools and technology needed for the job
If your child is genuinely working for the company, the company can normally provide the equipment they need to do that job. Examples include a laptop, monitor, software licence, protective clothing or specialist tools.
The equipment should remain company property and any private use should be insignificant where the relevant exemption requires this. Buying a high-specification gaming computer mainly for use in the child’s bedroom and describing it as office equipment would clearly be risky.

A company can also provide one mobile phone per employee without a taxable benefit where the contract is between the company and the supplier. Reimbursing a child’s personal phone contract does not automatically receive the same treatment.
The practical rule is simple: choose equipment that fits the role, document why it is needed and keep the contract and invoice in the company’s name.

Idea five: pay for relevant training and qualifications
A company can often pay for work-related training without creating a taxable benefit for the employee. This can be helpful where an older child is joining the business or developing skills the company needs.

Examples might include:
– Bookkeeping or accounting-software training
– Digital marketing or photography training
– Health and safety certification
– Industry-specific technical courses
– Management or supervisory training
– First-aid training required for the workplace

The course should relate to the current employment or equip the employee for related work. Paying general university tuition or a course chosen mainly for personal interest is unlikely to fit comfortably within the work-related training exemption.

Idea six: reimburse genuine business costs
Your child should not be left out of pocket for costs incurred wholly for their job. The company can reimburse genuine business travel, supplies or other allowable employment expenses, provided the normal rules and evidence requirements are followed.
For example, if an adult child uses their own car for an authorised business journey, the company can pay the approved mileage rate. For 2026/27 the tax-approved rate for cars is 55p per mile for the first 10,000 business miles and 25p after that.
Ordinary commuting between home and a permanent workplace is not business mileage. Keep a mileage log showing the date, destination, purpose and miles travelled.

Idea seven: small staff benefits
Children who are genuine employees can take part in normal staff arrangements. This might include an annual staff function or occasional trivial benefits, provided all the relevant conditions are met.
A trivial benefit must cost no more than £50, must not be cash or a cash voucher, must not be a reward for work and must not be provided under a contractual entitlement. A birthday gift may qualify; a £50 voucher promised for completing the filing does not.
These rules should not be treated as a way to replace wages. They are intended for genuinely small, occasional benefits.

What about giving children shares and paying dividends?
This is where planning can easily become income shifting.

A dividend is paid because somebody owns shares, not because they have done work. Giving shares to a minor child and then paying dividends will not normally transfer the tax burden in the way a parent hopes. Where a parent provides the shares and the relevant income exceeds £100 in a tax year, the settlements rules can treat the income as the parent’s for tax purposes.

Adult children are different, but giving or issuing shares still needs careful thought. The transaction may involve:
– A valuation of the company and its shares
– Capital Gains Tax or Inheritance Tax consequences
– Employment-related securities rules if the child is an employee
– Changes to voting, dividend and capital rights
– Companies House filings and the company’s statutory registers
– A shareholder agreement and rules about a future sale

Shares can be appropriate where an adult child is genuinely joining the business as an owner and taking long-term risk. They should not be added casually as a short-term method of using another person’s tax allowances.

A quick comparison
Idea – When it may work – Main caution
Salary – Child performs real, useful work – Pay must match duties, hours and experience
Electric company car – Older child has a substantial genuine role – Benefit must be commercially justifiable and is taxable
Employer pension – Genuine employee with reasonable total reward – Large contributions for a small role may be challenged
Laptop, phone or tools – Equipment is needed for the job – Company ownership and private use matter
Training – Course supports the employee’s work – General education is not automatically exempt
Business expenses – Child incurs genuine costs doing the job – Keep receipts and exclude ordinary commuting
Shares and dividends – Adult child becomes a genuine co-owner – Valuation, tax, control and settlements rules need advice

What records should the company keep?
For a family employee, paperwork is protection rather than bureaucracy. We recommend keeping:
– A written job description and employment contract
– A record of the hours worked and tasks completed
– Evidence of the market hourly rate or salary
– Payroll records and payslips where required
– Payments from the company bank account to the child’s own account
– Expense claims, receipts and mileage logs
– Board approval for significant benefits or pension contributions
– Benefit reporting and employment-related securities filings where relevant
– Any required child-employment permit and risk assessment

Our conclusion
A limited company can create valuable opportunities for children, but the best ideas begin with genuine involvement in the business.

A modest wage for real work can teach responsibility, give the child experience and reduce company profit legitimately. Training, equipment and pension contributions can support their development. For an adult child with a substantial role, an electric company car may be a tax-efficient part of a normal remuneration package.

The wrong approach is to start with the child’s unused Personal Allowance and invent payments to fill it. Do not pay £12,570 simply because it appears tax-free. Do not provide an expensive car for a token role. Do not assume dividends to a minor child will escape the parent’s tax position.

Start with the work, decide what an unrelated employee would reasonably receive, and then apply the tax rules.

How Coalesco can help
Every family business is different. The right arrangement depends on the child’s age, their duties, their other income, the company’s profits and the wider plans for ownership and succession.

We can help you:
– Decide whether employing your child is commercially sensible
– Set a supportable salary and put the payroll treatment in place
– Compare salary, pension and benefit options
– Calculate the tax cost of an electric company car
– Review whether training, equipment and expenses can be paid by the company
– Plan properly if an adult child may become a future shareholder

If you would like to explore how your company can support the next generation without creating an HMRC problem, please contact Coalesco Accountants for a practical review by  visiting our website – https://coalesco.co.uk/, call us on 0115 238 3228 or email info@coalesco.co.uk or pop into our offices in Wollaton, Nottingham.

This article is general guidance based on 2026/27 rules and rates. It does not replace advice tailored to your company, employee or family circumstances.