Tax Year End Planning

With the end of the tax year only a few weeks away, now is the time to review your finances to ensure you are maximising any available allowances and perform essential housekeeping to stay on track to meet your current and future financial goals.

See below our tips to help you with managing your tax year end planning in 2018/19

Savings & Investments

Individual Savings Accounts (ISAs)

The maximum amount which can be added to an ISA in the tax year 2018/19 is £20,000 and this allowance will also remain the same for the next tax year. Both spouses are entitled to their own allowance, but an unused ISA allowance cannot be carried forward. So, if you do not use your ISA allowance by 5 April 2019 you will have lost the opportunity to do so.

Pension contributions

Take full advantage of increasing pension contributions by utilising the annual allowance, which is £40,000 (tapered if you earn over £150,000) or the value of your whole earnings – whichever is lower. Unused annual allowances may also be carried forward from the previous three tax years.

If you are receiving pension income from a flexi-access drawdown arrangement, then this limit reduces to £4,000. In order to qualify for income tax relief, the maximum personal contribution must not exceed 100% of pensionable earnings, though employer contributions can exceed “cash” salaries subject to wholly & exclusively rules which means the limit may be higher.

If you do not have any earned income, and you are under age 75, you are able to add £3,600 to a pension plan and receive basic income tax relief at source.

Tax planning

Capital gains

Use the capital gains annual exemption of £11,700 (2018/19) to realise gains tax-free. The allowance cannot be transferred between spouses or carried forward.

If you make other chargeable gains in the year, any gains in your investment portfolio will be added to the other gains made, and the cumulative result could give rise to a charge. If you make a capital loss, this must be first set against gains in the same tax year, but any excess loss may be carried forward indefinitely and offset against future gains.

Gifting

You can act at any time to help reduce a potential Inheritance Tax bill when you’re no longer around. Make use of the Inheritance Tax annual exemption that allows you to give away £3,000 worth of gifts outside of your estate. If unused, the exemption can be carried forward by one year.

On death, each individual has an IHT nil rate band of £325,000 and this is the amount that can be passed on to beneficiaries before a tax charge is due. Any excess is taxed at 40%.

Transfer income-producing assets

Consider transferring income-producing assets between your spouse or registered civil partner in order to use the Income Tax personal allowance and lower Income Tax bands of the transferee.

Overpayment and capital loss claims

Submit claims for overpaid tax and capital loss claims for the 2014/15 year before 5 April 2019, after which such claims will be time-barred.

If you would like to speak to one of our advisers on any of the points raised here, or for some general financial advice, please contact the team on 0800-160-1800

THE CONTENT IN THIS BLOG IS FOR INFORMATION ONLY AND DOES NOT CONSTITUTE FORMAL FINANCIAL ADVICE. INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES, OF AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.

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