With the end of the tax year fast approaching, time is running out to maximise allowances and reliefs that may be available to you.
We provide below a sample of tax saving options, many of which must be implemented prior to the tax year end date of 5th April, before the chance to do so is lost. This list is by no means exhaustive and if you own a limited company, the scope for mitigating personal tax is increased exponentially with the implementation of a sound profit extradition strategy.
Should you need to discuss your tax planning options, do not hesitate to contact us today for a no obligation consultation.
Charitable Giving and Gift Aid payments:
Making donations to Charity under gift aid not only allows the Charity to reclaim extra money from the Government, but for you personally if you are a higher rate taxpayer, it means that you are entitled to additional tax relief on the donations that you make.
Keep a record of any Gift Aid payments and these will be reported on your Tax Return and the additional relied claimed.
If any Gift Aid payments are going to be made post 6th April 2019 but before the filing of your 2019 Tax Return then consider whether to treat the payment in the earlier year to accelerate any further tax relief due.
Personal Pension Contributions:
Making payments into a personal pension plan before the end of the tax year is beneficial in two ways.
Firstly, the payments that you make are topped up by the Government. So, for every £100 that you contribute, the Government will add a £25 contribution, meaning that your contribution in total will be £125.
Secondly, if you are a higher rate taxpayer you will also get additional higher rate tax relief on the overall £125 contribution made, making pension contributions very attractive.
Pensions remain an efficient planning tool for tax and as an investment tool, but specialist advice is essential to ensure the correct levels of contributions are made.
An innocent oversight can cause an unwanted tax liability so do please get in touch with us for advice on this matter.
Making use of your ISA (Individual Savings Account) Allowances:
Based on current rates, £20,000 can be put into an ISA this year. The ISA wrapper ensures that any income and growth is free of income tax and capital gains tax.
Using an ISA is a useful technique for converting taxable interest and dividends into non taxable income.
The ISA deadline is 5th April 2019.
Capital Gains Tax:
The first £11,700 of any gain on the sale of assets in 2018/19 is exempt from Capital Gains Tax. This amount is known as your Annual Exemption. For 2019/20 this is £12,000.
Try and use your Annual Exemption as it is a use it or lose it basis as any amount not used cannot be carried forward.
You may consider ‘Bed and Spouse’ – selling your own shares and buying these again in your spouse’s name to take advantage of a lower rate of tax that they may pay.
In connection with the earlier ISA advice, you may want to ‘Bed and ISA’. This is selling your personal holdings and rebuying these shares within the ISA wrapper.
Do also claim any Capital Losses each year, even if an asset may not have been sold (i.e. has become negligible value.)
A couple can make a claim for Marriage Allowance – this is where you can claim a proportion of your partners unused personal allowance.
Rules apply of course, one of the couple must earn less than the current personal allowance of £11,850 and the other partner earn over this amount but must not be a higher rate taxpayer. The claim for 2018/19 is worth £238.
You can make a claim for the previous 4 years, so a claim before 5th April 2019 is essential as there could be cash sitting out there waiting to be claimed!
Does someone in your household receive Child Benefit? For those with income over £50,000 or are part of a couple where one of you earns over £50,000, then it is likely that the Child Benefit received will start to be clawed back.
Once your income is over £60,000 then all the Child Benefit received will be clawed back, and this is done via the Tax Return.
At this income level, you may want to consider disclaiming the Child Benefit ongoing to avoid this clawback charge – and you should ask that the payment is stopped rather than cancelled.
We offer tax planning and advisory services to both individuals and corporates in London, Essex and Manchester, if you would like to speak to a tax specialist, contact us today on 0800 169 3278.