With the Budget recently behind us and the next tax year about to begin on 6th April 2017, here are some of our top tax planning tips:
- Ensure income-producing investments are held by the spouse who has the lowest tax rate
- Make use of the transferable married couples allowance where one spouse is not fully using their personal allowance (savings of up to £220 per tax year).
- For those with income around the £100k mark, look at ways of preserving the personal allowance. Consider making gift aid payments or pension payments to help minimise loss of allowances.
- Consider topping up ISAs to maximum limits (£15,240 in 2016/17, £20,000 in 2017/18).
- Consider making personal pension contributions to preserve personal allowances and child benefit entitlement.
- Review pension contribution level in view of the tapering annual allowance (from 6.4.16) for individuals whose adjusted income (which includes pension contributions) exceeds £150,000pa.
- Make use of any unused annual pension allowance brought forward before it is lost.
- Make use of the £5,000 dividend allowance available for 2016-17 when considering salary/dividend options.
- Company cars: if your arrangement is coming up for renewal, consider opting for cars with lower emissions and list prices to help minimise income tax charge.
- SEIS/EIS can be tax efficient ways of making investments offering up to 50% income tax relief along with favourable treatment for CGT. However these types of investments are often higher risk so please contact us if you would like to discuss the options available.
Inheritance tax planning tips
- 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 tips
- Make use of the annual exemption, currently £11,100 and remember that assets can be transferred between spouses and civil partners tax-free.
The tax rules surrounding ‘non-doms’ change from 6 April 2017, having a significant effect on the tax status and tax affairs of many non-domiciled individuals.
Where a non-dom has been resident in the UK for 15 out of the last 20 years, they will be deemed domicile for UK taxes. Worldwide income and gains will be subject to UK tax and all assets subject to UK inheritance tax (IHT).
Making Tax Digital
This was first announced in the 2015 Budget and the government has recently relaxed the timescale slightly. It will initially require sole traders, partnerships and landlords with turnover over the VAT threshold to report quarterly information to HMRC from April 2018. Smaller sole trader businesses, partnerships and landlords will be required to follow in April 2019.