With April 6 and a new tax year just around the corner, now is the time for some end of year tax planning.
With some careful planning, much can be achieved in terms of reducing tax liabilities, capitalising on available allowances, and strengthening businesses as we move into the new tax year.
Here are seven steps you could be taking, particularly if you are a business owner, to take advantage of opportunities available:
- If you are a shareholder, ensure you have taken your tax-free dividend allowance, which is currently £2,000 per shareholder.
- If you have control over your level of income, ensure you have made full use of your personal allowance, which for 2019/2020 is £12,500.
- Pension contributions are £40,000 per year per person. If you haven’t reached this, subject to your personal financial circumstances, you might want to pay in more before the new tax year. Your company may also make contributions on your behalf subject to your pension scheme rules.
- The annual Capital Gains Tax allowance is £12,000, which means that if you are planning to sell an asset, the first £12,000 you make in profit is tax-free. However, if you have already reached your CGT allowance, you might want to defer its sale until the new tax year.
- If you have an ISA, make sure you have paid in the maximum to make use of the tax-free allowance available. The allowance for 2019/2020 is £20,000 which can be spread across up to four different ISAs: Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs.
- For Inheritance Tax purposes, there is an annual limit of gifts you can make in any one tax year which are IHT free.
- If you are part of a couple, look at income equalisation to mitigate your tax liability by keeping as much of the joint income as possible in the basic rate tax band.
Michael Blaken is accounts director at Optimum Professional Services, which is staging a free financial planning seminar on February 27. www.optps.co.uk