Tax planning to make the most of tax savings
With the nights drawing out and spring just around the corner, now is the time to dust off your finances and make sure that everything is in order before 5 April.
- Consider strategies to reduce taxable income. For example, by making gift aid donations or pension contributions. This is particularly important if there would be a loss of child benefit between £50,000 and £60,000 or a loss of personal allowance if income exceeds £100,000.
- Consider maximising capital allowances by accelerating a purchase of plant or equipment to just before the end of the current accounting period. This will mean the allowances are twelve months earlier than if the purchase was just after the year end.
- Review the way that profits are extracted from your business. Although dividends now attract a higher level of personal tax, they are still free of national insurance which can amount to 25.8% in combined employee/employer contributions. The first £5,000 of dividends are taxed at 0% and this will reduce to £2,000 from 2018/19. Therefore, it might be beneficial to draw more dividends now.
- Consider transferring income-producing assets to a spouse who may otherwise not use their personal allowance but be careful not to fall foul of the settlements legislation.
- The overall annual subscription limit for ISAs increased to £20,000 for 2017/18 and the new Lifetime ISA (LISA) allows an adult under the age of 40 to deposit £4,000 and receive a 25% bonus from the government.
- Remember your capital gains tax annual exemption of £11,300.
- Consider exempt transfers for inheritance tax including small gifts, annual transfers not exceeding £3,000, certain gifts in consideration of marriage/civil partnership and normal expenditure out of income.
Many allowances/reliefs are on a ‘use it or lose it basis’, so take the appropriate action now and don’t leave it too late.
To help focus your attentions we have produced our 2017/18 Year End Strategies guide which can be downloaded below.
- The current rules on ISAs and details on the new Lifetime ISA
- Extracting profit the tax efficient way
- Funding for your retirement
- Capital allowances and how to maximise reliefs
- Reducing your inheritance tax bill
- Are company cars the best option?
- Handy Year End checklist
Whilst our guide provides you with steps you should consider it is always best to seek professional tax advice to take into consideration your own personal and business circumstances. You can book a free initial consultation with a member of our tax teams by contacting or calling your nearest MFW office.