We are always working to mitigate your tax liabilities as best we can. The end of each tax year is a great opportunity to do just that. Here are our top 7 for UK taxpayers:
1) Invest in a personal pension
Subject to certain limits, pension contributions made personally are tax allowable which means that the effective cost be may as little as 55p to invest £1 in a pension. If you don’t provide for your retirement, who else will?
2) Review your investments
Review your investments to ensure that they are performing well. Most importantly, are they giving you the right balance of income and capital growth? Before acting on this one you absolutely must take independent financial advice. Most people waste their Capital Gains Tax allowance each year. This is a way to use it!
3) Utilise spouse’s tax rate bands
Use legitimate ways to reduce your tax bills by transferring income taxed at higher rates to a spouse paying tax at a lower rate. At the very least you should aim to make sure that neither spouse wastes their £11,000 tax-free allowance in 2016-17, but early professional advice is essential. In particular, care needs to be taken not to divert income deriving from a spouse’s company if that spouse substantially performs the work.
4) Consider selling good performing investments
If some of your investments have done very well and grown in value, consider it sensible to sell some of them to save yourself even higher tax bills in the future. Each year you can make tax-free gains of £11,100 (2016/17). Bed and breakfasting investments is no longer possible, but you may still be able to save tax by selling shares and buying them back more than 30 days later, or having your spouse buy them back.
5) Change life assurance policies into your business name
Make sure your life assurance policies are in the name of your business, so you can get tax relief on them now. A little known rule allows you to claim tax relief through your company. For any qualifying unfortunate event that they pay out, the proceeds are still tax free!
6) Consider investments that give tax-free returns
For example: National Savings Certificates, Friendly Societies and ISAs. At present you can invest up to £15,240 a year in an ISA and £4,080 in a Junior ISA. If you don’t use your allowance each year, you lose it. Again, before acting on this one you must take independent financial advice.
7) Avail of tax relief on gifts
If you are a higher rate tax payer, make sure you claim back the tax relief on any Gift Aid donations you made during the year. Also remember that you can give away £3,000 worth of gifts each tax year without them being added to the value of your estate.
Remember that the UK tax year runs from 6 April to 5 April each year. Personal tax returns are due for filing by 31 January if filing online.
Need assistance with your UK tax return? Contact us today