The tax year ends on April 5, and with just a few weeks to go, time is flying by. However, have you considered what changes you can make to enhance your tax position? This time of year can be a very beneficial period to reflect on any new tax opportunities you can take. We’ve put together a list of strategies to help you lower your tax liability while we’re still in the home stretch of the end of tax year.
Capital Gains tax (CGT) is the tax you need to pay on any profits you make when you sell an asset. This can be as diverse as a second home or a valuable work of art.
However, before CGT applies, everyone has an annual allowance. For 2018/2019, the threshold is £11,700. However, the allowance cannot be carried forward to the following year. This means that if you do not use the amount, you will miss out.
If you have any gains which are unrealised, it might be a good option for you to sell your assets ahead of April 5. This way, you’d be benefitting from your annual exemption for capital gains – a tax efficient option.
It’s also worth noting the CGT allowance is attributed to individuals. This means that couples get a joint allowance of £23,400 in 2018/2019. Transferring assets under your joint name would enable you to stay within your individual limits.
ISA contributions have an annual limit of £20,000. There is no tax relief on ISA contributions. However, any capital gains (for stocks and shares ISA), bank interests or dividends are tax free.
For couples, it’s also good to consider taking advantage of each other’s ISA to increase your allowance up to £40,000 for 2018/2019 to save or invest.
It’s possible to get tax relief amounting up to 100% of your earnings. Individuals who do not earn any income can still get tax relief on net personal pension contributions of £2,880.
If you have been considering boosting your pension contributions, a good time to do this would be before the end of tax year. However, this would depend on how much you earn so its important to obtain advice on this to ensure that you don’t exceed the allowance.
In 2018/2019, this allowance is £40,000 and can be carried forward for a maximum of three years. However, the amount is tapered by £1 for every £2 up to £10,000 if your income exceeds £150,000.
If you haven’t made any annual gifts in the current or previous tax year it would be ideal to do before the end of the tax years to use up the annual gift exemption of £3,000 per tax year. Also if any family or friends are getting married or entering a civil partnership you can take advantage of inheritance tax free gifts within the gift is made within certain thresholds.
Have you been considering expenditure for your business? If so, it’s important to think about the timing before you proceed. Incurring your business expenses before the end of tax year will place you in a good position to gain tax relief as early as possible.
The information and advice we have provided above is general. However, we do understand that tax enquiries vary case by case. Should you have any specific questions relating to your specific tax situation, our team of experts will be able to assist you with making the right decision in advance of the end of the financial year. For any queries, do not hesitate to get in touch with your usual Hall Morrice contact or Shona Duncan.