Previously on the blog we have looked at our top 5 tax savings tips – which you might want to revisit, along with the Marriage Allowance and Tax Free Childcare, if you haven't already done so.
Now that the January tax return deadline is over, we can turn our attention to the end of the tax year, which will soon be upon us!
Although the following can be reviewed/discussed at any time of year, we want to make sure that you're not missing out on anything, so here are some of most important tax planning opportunities, which could be lost after 5 April 2019.
1. Make the most of your ISA allowance
ISAs seem to have taken a bit of a back seat since the introduction of the Personal Savings Allowance, but they still remain one of the best ways of sheltering money from Income Tax and Capital Gains Tax, and can provide a higher rate of return than traditional savings accounts
You can save up to £20,000 in an ISA in this tax year and £4,260 if you are saving for a child.
No one is quite sure if the tax reliefs on pensions will be reduced by the Government, and we are eagerly awaiting the Spring Statement to see if anything is announced.
At the moment, the un-tapered Annual Allowance is £40,000 and so it's certainly worth thinking about making a personal pension contribution if funds allow.
Remember, you only need to pay £80 in, in order to get £100 in your pension pot, as the government “top up” the additional £20. If you are a higher rate tax payer, then an additional 20% relief is also available.
Alternatively you might want to consider a company contribution into your personal pension pot instead, as the company should get corporation tax relief on said contribution.
3. Gift it if you don't want to save it!
For Inheritance Tax (IHT) purposes, everyone gets a tax-exempt allowance of £3,000 per tax year for gifts. If you haven't used your allowance for 2017/18 then this could also be utilised in 2018/19, meaning you could gift £6,000 which would reduce your Estate for IHT purposes.
By utilising this allowance, you will ensure that any IHT bill is kept to a minimum for your loved ones
There are other gifts that you can make, which are exempt for IHT, such as gifts out of income, but you need to ensure that you keep proper records of any gifts made.
4. Sell off those assets!
If you find yourself needing access to cash, then selling an asset/withdrawing funds from a portfolio might seem like a good idea. To ensure that it's done in the most tax efficient way, make sure you utilise your annual exemption for Capital Gains Tax (CGT) purposes, which is currently set at £11,700.
This allowance can't be carried forward, and so making regular gains, rather than one large one, can make sense as part of a tax reduction strategy.
If you have already sold an asset and realised a gain in excess of the annual exemption, then you may wish to consider selling something which would make a loss, so that you can offset this for tax purposes, as capital losses cannot ordinarily be carried back for CGT purposes.
5. Review your level of income
If you want to avoid paying higher or additional rate tax, then now is the time to review your overall taxable income, and take steps to reduce it if you need to, by making pension contributions, or charitable donations.
You might also want to check that you won't be losing your personal allowance, which starts to be withdrawn when your income reaches £100,000 – if you are expecting a bonus, then this could leave you with an unexpected tax liability
You might also be at risk of having to repay some/all of your Child Benefit payment, which becomes an issue when one person starts to earn over £50,000
So, there you have it – our most important tax planning tips as we approach the year end! If you have any queries then just let one of our team know, by contacting us directly.
Although some of the above options might help to reduce your tax liabilities, it is important to consider all financial aspects relating to such decisions.
We work with local Independent Financial Advisors, who will be more than happy to meet with you/have a chat to ensure that the decisions made are right for you and your family.