10 Top Tax Year-End Tips
Tax planning is a year-round consideration but it becomes more important as the tax year-end draws nearer. Taking appropriate action before 5 April will help to ensure that you are able to make the most of the tax-saving opportunities available to you. Here are some invaluable basic tips to consider before 5 April:
10 Top Tax Year-End Tips
1. Invest in ISAs – The good old ISA is a staple of tax year end transactions. There is no ‘carry forward’ allowance available so it really is a case of use that £20,000 allowance or lose it.
2. Pension contributions – You can receive tax relief on contributions of up to 100% of your earnings in 2017/18, subject to an annual cap of £40,000. Tax relief is available at the person’s marginal rate of tax and there is a facility to carry forward unused annual allowances for up to three years.
3. Use your Capital Gains Tax annual allowance – The annual exemption for CGT for 2017/18 is £11,300 for individuals. Spouses/civil partners may consider transferring assets to ensure that they both utilise their annual exemption.
4. Review your portfolio dividend income – The dividend allowance is falling from £5,000 to £2,000 on 5th April 2018.
5. Cash gifts – You can gift up to £3,000 each tax year free of IHT, or £6,000 if there was no gift in the previous tax year. You are also allowed to make as many gifts of up to £250 each as you wish to other people as well as gifts on the occasion of a marriage.
6. Charitable donations – Gift aid donations to charity give tax relief at your highest marginal tax rate therefore if you have made donations and made a gift aid declaration, you may be able to claim up to 25% in tax relief, potentially reducing your higher rate tax amount.
7. Transfer of assets – If you’re married/in a civil partnership and don’t own assets in some form of joint ownership, it may be advantageous for tax purposes for transfers to be made. Consider transferring savings and investments to your partner if they pay a lower rate of tax than you do. Complex rules apply, but if appropriate to your particular situation, it could provide benefits for income tax, capital gains tax and even inheritance tax.
8. Child benefit clawback – Taxable income exceeding £50,000 for the year could lead to a claw back of child benefit. Once taxable income reaches £60,000 the benefit will be lost in full. Reducing, deferring or transferring taxable income could help to preserve this benefit.
9. Personal allowance clawback – High earners need to watch earnings between £100-£123k. The personal allowance is reduced by £1 for every £2 of income above £100,000. There is therefore no personal allowance at all where income exceeds £123,000. This also means that, over the income band £100,000 to £123,000, the effective rate of income tax is 60%.
10. Tax Efficient Investments – Investors can reduce their annual income tax bills by making investments through Venture Capital Trusts, Enterprise Investment Schemes and Seed Enterprise Investment Schemes. Capital gains tax deferral relief/exemption may also apply.
It is important to ensure that if you have not done so already, you should take the time to carry out a review of your tax and financial affairs to identify any tax planning opportunities and take action before it’s too late. To discuss your situation or for further information, please contact us – we look forward to hearing from you.