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Year End Tax Planning Tips act before 5 April

Year End Tax Planning Tips act before 5 April

Tips to minimise the tax you pay

Year End Tax Planning Tips act before 5 April

Year End Tax Planning Tips act before 5 April

Year End Tax Planning Tips act before 5 April
Have you utilised all your year-end tax planning deadline opportunities?

As we near the 2017/18 tax year end on 5 April, if appropriate to your particular situation, we’ve provided some tax planning tips to help you maximise the use of your various tax allowances and minimise the tax you pay.

We take a personal approach to your tax needs. Informed by our detailed knowledge of your affairs, we explore some of the best options which you could consider to help manage your tax obligations most effectively. Therefore we recommend you speak to us for specific advice when considering any tax planning

We can help further with your tax, wealth, financial or retirement planning before 5th April please contact us as soon as possible.

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 tax- paying 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. Or if it is around the £50,000 level and you claim Child Benefit, look at preserving that. 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
•Consider making investments to reduce your income tax (and possibly capital gains tax) bill such as VCT, EIS and SEIS
•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
•Gifting whilst you are alive can be very rewarding, for instance you can reduce your taxable estate by making gifts into your child or grandchildren’s junior ISA or pension, which over time could go a long way to providing them with a head start in life.
•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. Using the carry forward provisions, you could potentially remove up to £6,000 or £12,000 as a couple, from your estate immediately.
•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

Pension funds can be very effective in Estate Planning

As well as the increased flexibility in terms of drawdown arrangements that were introduced in April 2015 there were some important changes to what happens to the undrawn funds on death. These changes mean that your pension fund can be passed to survivors’ tax efficiently.

Where the pension scheme member dies under age 75 certain lump sum death benefits are now tax-free. In particular a drawdown or flexi-drawdown pension fund lump sum death benefit or an uncrystallised funds lump sum death benefit.

Where the member at the time of their death was age 75 or older the special lump sum death benefit charge on the fund will be 45%. However, if a nominated beneficiary wants to draw down income each year rather than take the lump sum the amounts drawn would be taxed at their marginal income tax rate. It has recently been reported that there are currently £2 billion of pension assets in drawdown where the beneficiary is aged under 55 suggesting that a significant number of individuals have taken advantage of the new rules.

Note that cash and quoted shares, including those held within an ISA, are subject to inheritance tax on death whereas pension fund assets are generally free from inheritance tax. It may therefore be more tax efficient to spend or give away cash and shares rather than draw on the pension fund.

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.

If you don’t use your allowance this tax year, it cannot be rolled over and as such can be lost forever.

Build a tax efficient retirement plan
Pension contributions must be paid on or before 5 April 2018 for them to be relieved against 2017/18 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief.  Increased amounts may be possible if your company makes the pension contribution on your behalf. However, these will be subject to the annual allowance, which is generally £40,000. This is reduced for those whose income is above certain technical thresholds and has to be considered when both adjusted annual income is (their income plus both their own and their employer’s pension contributions) over £150,000 and ‘net’ income is at least £110,000. Net income broadly means an individual’s income less own gross pension contributions made. For every £2 of adjusted income over £150,000, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

Year End Tax Planning Tips act before 5 April

Charitable Donations
Gift aid donations work in a similar way to pension contributions in that they are also made net of 20% basic rate tax.  This 20% uplift is reclaimed by the charity. In addition, as with pension contributions gift aid donations increase the threshold at which the personal allowance is reduced.

Advisory fuel rates for company cars
New company car advisory fuel rates have been published which take effect from 1 March 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 March 2018 are:

Year End Tax Planning Tips act before 5 April

HMRC guidance states that the rates only apply when you either:
• reimburse employees for business travel in their company cars or
• require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

Minimum Wage increases
The National Minimum Wage (NMW) and National Living Wage (NLW) are the legal minimum wage rates that must be paid to employees. Employers are liable to be penalised for not complying with the NMW and NLW rules.
There are different levels of NMW and NLW, depending on age and whether the employee is an apprentice. The rates are due to increase from 1 April 2018 as shown in the following table:

Year End Tax Planning Tips act before 5 April

Year End Tax Planning Tips act before 5 April

*for apprentices under 19 or 19 or over and in the first year of their apprenticeship
There are no exemptions from paying the NMW on the grounds of the size of the business.
If you would like help with payroll matters please get in touch.

Year End Tax Planning Tips act before 5 April

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