The end of the Tax Year is fast approaching… here’s our Top 10 things to consider before 5th April 2016.
If you’d like to download one one page summary Top 10 in PDF, click on ‘Read More’, then click here: Top10-EndofTaxYear-Sestini&Co
1. Invest in an ISA
- Income and capital gains from ISAs are tax free
- UK residents over 16 years of age can invest up to £15,240 in an ISA (stocks and shares ISAs available to over 18s)
- Parents can contribute up to £4,080 into a junior ISA or child trust fund for children under 18
- Help-to-buy ISAs are able for 4 years from autumn 2015, individuals aged over 16 who are saving to buy their first property can save up to £200 per month, to which the Government will add 25% (up to a maximum of £3,000)
2. Contribute to your pension
- Tax relief on pension contributions will be restricted for Additional Rate taxpayers from 6 April 2016 but transitional rules for 2015/16 give individuals the opportunity to make extra pension contributions to claim full tax relief
- During the 2015/16 tax year there are 2 Pension Input Periods, the total annual allowance is therefore up to £80,000 for the year. Unused allowances from previous years may also be available for use.
- Pension contributions reduces your taxable income and can therefore have the added benefit of protecting your entitlement to Child Benefit or the Personal Allowance if you earn just over £50,000 or £100,000.
3. Contribute to your employees’ pensions
- If you own a business, making pension contributions to your pension can be a tax efficient way to extract profit from your business (there is a corporate tax deduction as well as the reduced personal taxable income).
- If employees choose to sacrifice some of their salary for pension contributions this will reduce both their and your tax and national insurance liability.
4. Consider dividend payments in 2015/16 before the tax rate rises
- From 6 April 2016, most individuals that receive more than £5,000 of taxable dividend income will pay more tax on this dividend income
- Tax on dividends will increase:
- in the basic rate band from 0% to 7.5%
- in the higher rate band from 25% to 32.5%
- in the additional rate band from 30.56% to 38.1%
- If you receive a significant amount of dividend income from a company that you have control over, there may be advantages in bringing forward dividends into the 2015/16 tax year.
- If you receive a small amount of dividend income but are a higher rate taxpayer there may be an advantage in deferring your dividends into the 2016/17 tax year.
5. Transfer assets to your spouse
- If your spouse is a lower rate taxpayer then transferring assets into their name can reduce your tax liability. Moving assets between spouses is exempt from capital gains tax and will not incur inheritance tax.
6. Give money away
- If your estate is likely to be valued above £325,000 you can reduce the inheritance tax liability by making gifts now. You can also reduce the rate of Inheritance Tax charged by gifting 10% of your net estate to charity in your will.
- Each year you can make some Inheritance Tax free gifts:
- Up to £250 to any one person
- Up to £3,000 total gifts
- Regular gifts from your income (speak to us for further advice in this regard)
- Gifts from your savings/investments to people who depend on you financially (speak to us for further advice in this regard)
- Charitable gifts
- On the occasion of marriage you can also make the following Inheritance Tax free gifts:
- Up to £5,000 for your child and their partner
- Up to £2,500 for your grandchild and their partner
- Up to £1,000 to anyone else
- If you run your own business it can be beneficial from a tax perspective to operate as a limited company rather than as a self employed individual, we are happy to discuss this in further detail with you.
- People who operate a property rental business (or even a single buy-to-let) may find that the new dividend allowance, the restriction on tax relief for finance costs and the decrease in Corporate Tax rates in 2017 and 2020 are all good reasons to think about incorporating.
8. Invest in an EIS/VCT/SEIS Scheme
- Potential income and capital gains tax relief available – may be worth considering if you have a substantial income/capital gains tax liability you would like to offset
- These options should only be considered by experienced business owners and investors with the suitable professional advice (we can put you in touch with one of our contacts if you would like to know more about such opportunities)
9. Leave the UK
- Emigrating is a big decision but achieving Non Resident status can have significant tax advantages. Non Residents are subject to income tax on their UK sourced income only and can be exempt from capital gains tax (with the exception of capital gains on residential property)
- If you are considering moving abroad for personal or business reasons we would be pleased to advise you on the potential savings available and action needed to achieve those savings.
10. Remain outside the UK
- If you have been outside of the UK for some time and have established yourself as a Non Resident you need to closely monitor how much time you spend back in the UK to ensure you don’t jeopardise your Non Resident status.
- If you intend to return to the UK you should also review whether you have been Non Resident for 5 complete tax years to ensure that you do not trigger a capital gains tax charge on gains made during your temporary period of non residence.
Bonus tip: Non Domiciled individuals should review their remittances
- If you are not domiciled in the UK you should review any remittances you have made to the UK to determine if there is scope to remit further funds or to take remedial action to reduce future liabilities if you have “over-remitted”.
- Now is also a good time to review your longer term plans with the impending changes to the Domicile rules which will come into effect from 6 April 2017.
If you would like to discuss any of the tips detailed above call us on 01761 241861. We would be pleased to advise you or to invite you into our offices in Paulton.