As we near the 2017/2018 tax year end, we thought it would be helpful to provide some tax planning tips to use to help maximise the use of your various tax allowance and minimise the tax you pay. Of course, these aren’t appropriate to everyone but could be invaluable to some.
Income Tax planning
• Ensure income-producing investments are held by the spouse who has the lowest tax rate
• Make use of the transferable married couple’s allowance where one spouse is not fully using their personal allowance and the taxpaying spouse only pays the basic rate of tax
• If your income is around the £100,000 figure, look at ways of preserving the personal allowance. You could consider making Gift Aid payments or pension payments to help minimise loss of this allowance
• Consider topping up any Individual Savings Accounts (ISAs) you or your spouse have to the maximum limit, which is £20,000 each
• Make use of any unused annual pension allowance brought forward before it is lost
• Make use of the £5,000 dividend allowance available when considering salary and dividend options
• If your company car arrangement is coming up for renewal, consider opting for cars with lower emissions and list prices to help minimise an Income Tax charge.
Inheritance Tax (IHT) planning
• Use your annual exemption for gifts of up to £3,000 per tax year; this exemption can be carried forward to the next tax year
• Regular (qualifying) gifts out of net income are exempt from IHT – consider establishing a pattern of regular gifting to take advantage of this tax break
• Wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, or £5,000 for a child) are exempt from IHT
• Small gifts exemption up to £250 – you can give as many gifts of up to £250 per person as you like during the tax year, providing you haven’t used another exemption on the same person.
Capital Gains Tax planning
• Make use of the annual exemption – currently £11,300 – and remember that assets can be transferred between spouses and registered civil partners tax-free.
Help to optimise your tax position
The UK tax system continues to grow ever more complex, with a greater responsibility being placed on the individual to get their tax right. If you pay tax, we can help to optimise your tax position. To review your situation, please contact us.