20 March 2019

Tax year-end planning

Are there are any tax reliefs or exemptions that you could be entitled to?

With the 5th April tax year end approaching, its always a good idea to take some time to review your financial position and check whether there are any tax reliefs or exemptions of which you should take advantage.

Noted below are some of the key tax planning areas worth bearing in mind:

Income Tax

  • Where spouses/civil partners pay income tax at different rates, consider transferring income producing assets to the spouse/civil partner paying tax at the lower rate; and ensure neither spouse’s/civil partner’s tax free personal allowance is wasted, if at all possible.
  • Charitable donations under Gift Aid are an effective way of reducing taxable income, particularly for those with taxable income over £100,000 who would otherwise lose their tax-free personal allowance.
  • Pension contributions are another very effective way of reducing taxable income.  The amount of the annual tax deductible contribution is limited to £40,000 per tax year, though where contributions made in the last three years have not fully utilised each year’s £40,000 allowance, it can be possible to carry forward the unused allowances from those three years and make a one-off “catch-up” contribution.

Capital Gains Tax

  • Do ensure the £11,700 annual exemption is used, if at all possible, as it cannot be carried forward.
  • Assets can be transferred between spouses/civil partners without triggering gains and so transferring assets just before a sale can be a good way of accessing two annual exemptions instead of just one.

Inheritance Tax

  • The annual Inheritance Tax exemption is £3,000; and if the previous year’s exemption has not been used it can be carried forward meaning a total of £6,000 can be given away before 5 April 2019 without any Inheritance Tax implications.
  • Often overlooked is that there is no limit on the number of gifts of £250 per person that can be made.

Tax efficient investments

There are a number of different kinds of investment that attract tax reliefs, such as those under the Enterprise Investment Schemes; Seed Enterprise Investment Scheme; Social Investment Tax Relief; and Venture Capital Trusts.

All have limits on the amounts of investment that can be made in any particular tax year and so those who typically take advantage of these tax reliefs should review whether they would like to make any further investment before 5th April.

Individual Savings Accounts (ISAs)

Whilst not a tax relief itself, the investment returns from ISAs are tax-free and so wherever possible, advantage should be taken of the subscription allowance, which is £20,000 for the 2018/19 tax year.

Parents can also make payments into a Junior ISA for their children, with the current tax year’s allowance set at £4,260.