Avoid the mad march rush – get a head start on your tax planning
Although the current tax year doesn’t come to an end until 5 April 2019, tax planning shouldn’t be a mad rush in March.
Now is the perfect time get a head start on your tax planning resolutions to enhance your own, family’s or your business’s tax-efficient plans for the years ahead. In this article, we have set out some tax tips and actions that you may find helpful.
Reviewing your tax affairs now will ensure that available reliefs and exemptions have been fully utilised, which could potentially help to reduce your tax bill. It is essential to make sure that you take the time to carry out a review of your tax and financial situation, as this will help identify any tax planning opportunities and allow you to take remedial action before it’s too late if necessary.
Here are our tips to help you get ahead on managing your tax affairs in 2018/19:
Pension contributions (spouses and children)
You may want to consider contributing up to £2,880 towards a pension for your non-earning spouse or your children. Did you know that the Government will add £720 on top – for free? You can find out more about starting a pension for a child here.
Individual Savings Accounts (ISAs)
Ensure you are fully utilising your tax-efficient ISA allowance. The allowance for the tax year 2018/19 is £20,000 per person, and the Junior ISA allowance is £4,260 for children under 18.
You may be able to use the capital gains annual exemption of £11,700 (2018/19) to realise gains tax-free. It is worth noting that this allowance cannot be carried forward or transferred between spouses.
Consider maximising your own pension contribution amount and therefore potentially your tax relief. Take full advantage of the annual allowance, which is £40,000 (tapered if you earn over £150,000) or the value of your total earnings, whichever is lower, by increasing your contributions.
You may also be able to carry forward unused annual allowances from the previous three years depending on your circumstances.
If you are running your own company, it’s a good idea to determine your pay and benefits strategy. This because for the tax year 2018/19, the dividend nil-rate band is reduced from £5,000 to only £2,000. This means it’s crucial to understand the tax implications of your chosen approach to salary, benefits, pensions and dividends.
To help reduce your potential future Inheritance Tax bill consider utilising the annual Inheritance Tax exemption that allows you to give away £3,000 worth of gifts outside of your estate.
You can also carry this exemption forward for one year if you have not used it.
Transfer income-producing assets
Think about transferring income-producing assets between your registered civil partner or spouse to make use of the Income Tax personal allowance and lower Income Tax bands of the transferee.
Overpayment and capital loss claims
You can still submit claims for overpaid tax and capital loss claims for the 2014/15 year as long as you do it before 5 April 2019. After this date claims from this time frame will be barred.
For the tax year 2018/19, the restriction on the deductibility of mortgage interest and other finance costs doubled from 25% to 50%. Consider taking steps sooner rather than later if you wish to mitigate the impact (such as incorporation, for example).
In future years, the restriction will apply to 75%, and from April 2020, it will be 100% of finance costs incurred by individual landlords.
Professional Tax Advice
Not all of these tax tips will be relevant to you, your family or your business. However, where an idea is of interest or to review your situation, please contact MRA for a discussion on how this could form part of your tax-efficient plans for 2018/19 and the future.
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