This is a generic tax checklist covering areas that might be of interest and use to you or your family. Each taxpayer’s affairs are unique and some of the items below will not be relevant. Please contact us to arrange a specific meeting to discuss your affairs. Remember- many of the areas and opportunities will be “lost” once the tax year comes to an end on 5 April.
Many of these areas are actually quite complex and professional advice should be sought.
Income Tax
Gift Aid
If you are a higher rate (40%) or additional rate (45%) taxpayer, ensure you have a record of payments in the tax year since April last under Gift Aid – and consider whether any further gifts might be made. Note this may include admission fees to certain places, as well as items such as a National Trust subscription. Additional tax relief may be due to you.
However, if you are a non-taxpayer please be aware that you can have a tax liability if you make a donation under gift aid and you do not pay sufficient tax on your income to cover the gift aid tax.
Pension Contributions
You are entitled to make contributions to a pension scheme of £3,600 p.a. (you only pay £2,880). If you have earnings, you can contribute up to the amount of your earnings or £40,000 p.a. whichever is the lower, or a company can make a pension contribution of up to £40,000 p.a. irrespective of earnings. There is also scope to utilise “unused reliefs” from prior years.
Care is needed where there are high levels of income as allowances can be restricted to just £4,000.
If you are aged over 75, no tax relief is available on the contributions made.
Accelerating payments to pensions and charitable giving can give rise to significant tax savings due to the vagaries of the tax system. Headline tax rates are 20%, 40% and 45%, but the personal tax allowance starts to taper away when income exceeds £100,000 and is fully tapered away when income reaches £125,140. On income between these thresholds, the tax rate is equivalent to 60%. Accelerating pensions or gift aid payments can therefore provide up to 60% tax relief.
Note the above scenarios also apply if your income exceeds £50,000 and you are claiming child benefit.
If you are in a pension scheme where your contributions are paid net of 20% tax (such as NEST) and you are a higher rate or additional rate taxpayer, you may be able to claim additional tax relief on the pension contributions paid.
Tax efficient investments
Individual Savings Accounts (ISAs) – there are different types of ISAs.
ISA – an annual allowance of £20,000 can be invested by UK residents over 18.
Junior ISA – an annual allowance of £9,000 can be invested per child.
Lifetime ISA – up to £4,000 of the above ISA limit can be contributed. This is only available for those aged 18-40 at the time of opening the account, and contributions can be made up to the age of 50. A bonus of 25% will be added to each contribution, but only retained if the LISA is used to purchase a first home or withdrawn after the age of 60.
Savings and Dividend Allowances
A basic rate taxpayer has a £1,000 savings allowance, a higher rate taxpayer has a £500 allowance but there is no allowance for additional rate taxpayers. Are savings structured so that benefit is made of these allowances?
There is also a £5,000 starting rate for savings allowance in certain circumstances where non-savings income is relatively low.
For all taxpayers, there is a £2,000 dividend allowance – so the first £2,000 of income from dividends is taxed – but at 0%.
Trading and Property Allowances
There are two separate £1,000 tax free allowances available – one for trading and miscellaneous income and one for property income. These can be claimed in place of actual expenditure.
A rent-a-room relief of £7,500 is available where part of your main residence is rented out.
If you are about to incur expenditure in your business or on your rental property, you should consider whether to purchase the item(s) before your accounting year end rather than just after so that you accelerate your tax relief by a year. However, not all expenditure will reduce your tax bill and if you are unsure of the impact for you please get in touch to ask us before you make the purchase.
Income tax relief is available to reduce tax liabilities in these investments: –
Venture Capital Trusts (VCTs) – investment up to an annual maximum of £200,000 qualify for relief at 30%, dividends received are tax free and there is no Capital Gains Tax to pay on any gain when sold.
Enterprise Investment Scheme (EIS) – investments qualify up to an annual maximum of £1 million with 30% tax relief, if held for 3 years the capital gain is exempt and there is also the potential for deferment of Capital Gains generated elsewhere on investment.
Seed Enterprise Investment Scheme (SEIS) – Up to £100,000 p.a. can be invested in start-up companies with 50% tax relief. If held for 3 years, the capital gain is exempt and capital gains in the tax year can also be reduced.
Allowances
Marriage allowance – where one spouse or civil partner is a basic rate taxpayer and the other has income below the personal tax allowance, 10% of the personal allowance can be transferred to the tax paying partner – £12,570 @ 10% = £1257 – 20% thereof is £251.40.
Employment – tax relief can be claimed on certain professional subscriptions, and a working from home allowance might also be claimable (provided your employer does not pay them on your behalf). Business mileage can be claimed as well. If your employer does not pay you the full statutory rate (45p per mile for the first 10,000 miles and 25p thereafter), you can claim the difference between these rates and the rates paid.
If you have unclaimed allowances or expenses you can make a claim from 6 April 2017 but you can only claim for 2017/18 up to 5 April 2022.
Capital gains and losses
The annual capital gains tax allowance is £12,300. Selling shares to utilise the gains exemption may be sensible – but care is needed if these are bought back again – the repurchase needs to be delayed for more than 30 days, or, if immediately, made by your spouse, civil partner or within an ISA.
Maybe there are losses which can be crystallised and utilised against other chargeable gains in the tax year or made available for carry forward to set against future gains.
Capital gains tax rates are 10% and 20% (18% and 28% for residential property), and the rate paid does depend on income in the tax year. Consideration could be given to transferring assets to a spouse or civil partner with lower income levels prior to making a disposal.
Inheritance Tax
There are IHT-free planning opportunities: –
Annual gifts of £3,000 can be made.
As many gifts as you like of £250 per person can be made each tax year.
Regular gifts from disposable income are also IHT free – but they need to be habitual, and income must exceed regular expenditure. This has to be structured correctly and we are happy to give you advice on this if you are interested.