As the end of the tax year will be here soon it is important to take time to ensure that you have taken action to minimize tax. There are some very basic things we should look at first, it may seem obvious but make sure that you have invested your maximum into ISA’s both cash and stocks and shares, this amounts to £20,200 now for a couple. It is also important to look at your existing ISA’s to ensure that you are still getting a competitive rate of interest in the case of cash ISA’s and that any stocks and shares ISA’s have been rebalanced against your current attitude to risk.
If one of a couple is a higher rate tax payer then perhaps income producing assets should be moved into the name of the spouse or partner who is paying a lower rate of tax. If you are thinking of selling an asset that may create a capital gains tax bill then thought should given to putting the asset into joint names as both parties have their own capital gains tax allowance. Looking at who owns what is very important if you or your partner is aged 65 or over as once income exceeds £22,900 the extra personal allowance starts to be reduced, interest from deposits and shares can make the problem worse. So with help from your Financial Planner at Wades we can restructure things to help.
Individuals who earn in excess of £112,000 will find that their personal allowance of £6,475 has been lost, so it is vital to try to take steps to reduce the taxable income back down to £100,000. There are various ways this can be done but again advice is needed so talk to us. Pension rules are also changing for those wishing to make large contributions going forward so this is a good time to look at that as well.
If a couple have made no previous gifts they can give away £12,000 completely free of Inheritance tax by used their annual allowance of £3,000 each which can be back dated one year, if this amount was invested into a plan in trust for children or grandchildren it could create a nice pot in the future free of IHT.
For higher earners or border line higher rate tax payers pension contributions are also worth considering as any contribution extends your basic rate tax band and can remove you from higher rate tax.
There are also other schemes available to get some back already paid, VCT’s and EIS’s offer tax benefits for investors and can be very effective in the right circumstances.
As the clock ticks by, the message is clear, talk to Wades to ensure that your tax planning is up to date.