Avoid the mad March rush
1st November 2018
Get a head start on your tax planning resolutions Although the current tax year does not end until 5 April 2019, tax planning shouldn’t be a mad
March rush. Now is the perfect time get a head start on your tax planning resolutions to enhance your own, your family’s or your company’s tax-efficient plans for the future.
We have set out some tax tips and actions that may be appropriate to certain taxpayers. Reviewing your tax affairs now will ensure that available reliefs and exemptions have been fully utilised, together with future planning which could help to reduce your tax bill.
It is important to ensure that, if you have not done so already, you 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. Personal circumstances differ, so if you have any questions or if there is a particular area you are interested in, please contact us.
Here are our tips to help you get ahead on managing your tax affairs in 2018/19
Pension contributions – spouses and children – consider contributing up to £2,880 towards a pension for your non-earning spouse or children. The Government will add £720 on top – for free.
Individual Savings Accounts (ISAs) – fully utilise your tax-efficient ISA allowance. The allowance for 2018/19 is £20,000 per person, whilst the Junior ISA allowance is now £4,260 for children under 18 and the same for the Child Trust Fund (CTF) for those who hold a CTF and don't wish to transfer it to a JISA. Any child holding a CTF cannot have contributions made to a JISA - they must first transfer the CTF to a JISA and close the CTF.
Capital gains – use the capital gains annual exemption of £11,700 (2018/19) to realise gains tax-free. The allowance cannot be transferred between spouses or carried for-ward, but assets could be transferred between spouses to enable 2 x CGT exemptions to be used (as long as the transfers represent genuine unconditional gifts).
Pension contributions – maximise contributions amount and tax relief. Take full ad-vantage of increasing pension contributions by utilising the annual allowance, which is £40,000 (tapered if you earn over £150,000 - important to note that adjusted in-come includes all types of income (except tax free income such as from ISAs) plus employer pension contributions, so someone could 'earn' less than £150,000 and still be caught. Threshold income must also exceed £110,000 for the taper to apply). Un-used annual allowances may also be carried forward from the previous three tax years.
Remuneration strategy – if you run your own company, it’s a good idea to determine your pay and benefits strategy sooner rather than later. For 2018/19, the dividend nil-rate band is reduced from £5,000 to only £2,000 – it’s really important to consider the tax implications of your chosen approach to salary, benefits, pensions and dividends.
Gifting – you can act at any time to help reduce a potential Inheritance Tax bill when you are no longer around. Make use of the Inheritance Tax annual exemption that al-lows you to give away £3,000 worth of gifts outside of your estate and for them to be immediately outside of your estate. If unused, the exemption can be carried forward one year as long as the current year's allowance is also being used up
Transfer income-producing assets – consider transferring income-producing assets be-tween your spouse or registered civil partner in order to use the Income Tax personal allowance and lower Income Tax bands of the transferee. To be effective for tax pur-poses, the transfer must represent a genuine unconditional gift from one spouse to the other.
Landlords – for 2018/19, the restriction on deductibility of mortgage interest and other finance costs doubles from 25% to 50%. If you plan to take steps to mitigate the impact (such as incorporation, for example), you may save more tax by taking those steps earlier on in the year. In future years, the restriction will apply to 75%, and then from April 2020, 100% of finance costs incurred by individual landlords.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES, OF AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.