Have you planned for the new tax year?

With the start of the new tax year on 6 April, here are a few re­liefs to con­sider:

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AL­LOWANCES

If you are mar­ried or in a civil part­ner­ship then it is pos­si­ble to trans­fer as­sets tax free to ben­e­fit from the use of tax free al­lowances or un­used lower rate tax bands.

• For dividends; the first £2,000 of div­i­dend in­come for any UK tax­payer is tax free. Whilst this amount is still in­cluded within your tax­able in­come no In­come Tax (IT) is charged. If your spouse or civil part­ner is not us­ing their div­i­dend al­lowance you may wish to con­sider trans­fer­ring some shares to them to ben­e­fit from this. As a higher rate tax payer you could save up to £650 tax per an­num.

• For in­ter­est; a sim­i­lar relief ex­ists with ba­sic rate tax pay­ers be­ing able to re­ceive up to £1,000 In­come Tax per an­num. This is re­duced to £500 for higher rate tax pay­ers. Additional rate tax pay­ers are not en­ti­tled to this relief.

• Claim­ing the Mar­ried Al­lowance; where you are a ba­sic rate tax payer and your spouse or civil part­ner has in­come less than their per­sonal al­lowance (PA) they can trans­fer up to 10% of their un­used PA so that you re­ceive a 20% tax credit on this amount. The max­i­mum claim equates to a £250 tax sav­ing for 2019/20.

GIFT AID

If you are think­ing of do­nat­ing to char­ity you could save tax at the same time. Gift Aid Do­na­tions (GAD) ex­tend both the ba­sic rate tax band (BRB) and higher rate tax band (HRB) by the amount you do­nate plus 20% and can even be treated as if they were made in the pre­vi­ous tax year. It is im­por­tant that you make the ap­pro­pri­ate gift aid dec­la­ra­tion and ob­tain ev­i­dence of this in or­der to make a claim on your self-as­sess­ment tax re­turn.

PEN­SION CON­TRI­BU­TIONS

Pen­sion con­tri­bu­tions can re­duce your tax li­a­bil­ity by in­creas­ing your BRB. An £800 pen­sion con­tri­bu­tion could cost a higher rate tax payer £600 due to the way the tax relief is ap­plied.

The amount of per­sonal con­tri­bu­tions you can make will de­pend on your other in­come and your pen­sion pro­vi­sions al­ready in place. In some cases, too much of a con­tri­bu­tion could cause a tax charge.

RE­DUC­ING IN­COME

An in­di­vid­ual will start to lose their per­sonal al­lowance where their tax­able in­come ex­ceeds £100,000. Like­wise, a fam­ily will start to lose their child ben­e­fit where one per­son’s in­come ex­ceeds £50,000. In cir­cum­stances like these it would be ad­vis­able to see if you can take any steps to re­strict your in­come to these thresh­olds. This could in­clude re­al­lo­cat­ing your in­come in ways de­scribed above or in­deed through the use of pen­sion con­tri­bu­tions or GAD. If you are the owner man­ager of your own com­pany then you may wish to con­sider if pay­ing the same level of dividends is still ap­pro­pri­ate where you breach these thresh­olds. In some cir­cum­stances draw­ing less money can re­sult in the same amount of net in­come.

IN­VEST­MENTS

Have you spo­ken to your fi­nan­cial ad­viser about tax ef­fi­cient in­vest­ments? Tax re­duc­ing in­vest­ments that you could make in­clude:

- En­ter­prise In­vest­ment Scheme (EIS) - Seed En­ter­prise In­vest­ment Scheme (SEIS) - Venture Cap­i­tal Trusts (VCT)

Where mak­ing such in­vest­ments are ap­pro­pri­ate to your cir­cum­stances you could get up to 50% in­come tax relief on the in­vest­ment made (SEIS) as well as the ben­e­fit of tax free gains and the pos­si­ble use of Cap­i­tal Gains Tax de­fer­ral relief if you have sold other in­vest­ments in the cor­rect time pe­riod.

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