Tax Year End is approaching, is your tax planning in order?
When you work hard you want to make sure you take home and keep as much of your earnings and wealth as possible. It’s easy to let time run away with you and never get round to having a financial review, but with the tax year end approaching on April 6th its the perfect time to take stock.
Regular tax planning is a good discipline to get into. It’s not about tax avoidance. There are certain legitimate ways the Government makes it possible to structure your finances tax-efficiently which everyone can take advantage of. Personal tax planning is simply an exercise to ensure you minimise your tax liability by using all the allowances, deductions, exclusions and exemptions available to you in order to reduce the amount of income tax you pay and, where relevant, the amount of capital gains tax.
We’ve put together a quick Personal Tax checklist for you to consider when looking at personal tax planning:
• ISAs – have you used your full ISA allowance for this tax year?
For the tax year ending 6 April 2015 this £15,000 which can be saved in a cash ISA or invested in a Stocks & Shares ISA or split between the two. And remember each person has their own allowance so a married couple could contribute £30,000 this tax year.
• Have you used the child ISA allowance?
If you have children you can contribute £4,000 to a Junior ISA for each child where the savings will grow tax free.
• Have you used your full Capital Gains Tax allowance?
The annual exempt amount is currently £11,000 and a married couple who own assets jointly can claim a double allowance of £22,000.
• Consider transferring assets
Complex rules apply but transferring savings and investments to your spouse if they pay a lower rate of tax could bring benefits for income tax, capital gains tax and even inheritance tax.
• Top up your pension
Personal contributions to pension schemes attract tax relief at your highest rate. The basic annual allowance cap on pension savings is £40,000 for the 20124/15 tax year.
• Prepare against inheritance tax
Consider using the annual gift exemption of £3,000 per person. In addition, transferring assets into a Trust can reduce inheritance tax liabilities
• Make charitable contributions
Charities can reclaim tax on donations made under Gift Aid. Donations are regarded as having basic rate tax (20%) deducted. If you are a higher rate tax payer, you can reclaim the difference between the basic and higher rate of income tax on your Self-Assessment form.
April, it’s the perfect time to take stock.
There are other avenues to explore in terms of tax-efficient saving and investment and a professional adviser is best placed to talk you through all the options from both a personal and business perspective. We offer a comprehensive financial planning service so why not speak to one of our advisers – and do it soon so you don’t miss out on any entitlements for 2014/15.