9th March 2020
As we are now fast approaching the end of the tax year on 5 April 2020, it is a good time to review your finances and consider some tax planning. We have outlined below some tax reliefs which could help reduce your tax bill.
For the 2019/20 tax year the personal allowance is £12,500 and the basic rate band is £37,500. You may want to consider transferring any income generating assets between spouses to ensure that together you utilise these rates and allowances, although this may now be more effective for future years.
If you are expecting your total overall income in 2019/20 to exceed £100,000, then remember that your personal allowance will be reduced by £1 for every £2 above the threshold, creating an effective tax rate of 60%. You may therefore want to consider additional pension contributions or charitable donations.
Have you used your annual allowance for pension contributions? Under current rules (but watch for changes in the Budget on 11 March), you can claim tax relief for annual pension contributions of up to £40,000 provided you have sufficient earnings. However, be cautious if your total income and employer pension contributions exceed £150,000 as your annual allowance can be reduced to a minimum of £10,000.
Also, if you have unused allowances from the previous three tax years these can be carried forward and used in the current tax year. Any unused allowance from 2016/17 will be lost if not used by 5 April 2020.
You can also contribute up to £3,600 into a pension scheme for your spouse, or a child, and obtain basic rate tax relief.
If you are feeling generous you may want to consider whether you want to make any gift aid donations by the end of the tax year. Not only will the charity benefit but if you are a higher rate taxpayer you can claim back the difference between the higher rate and basic rate tax on the donation.
Are you aware of the impending changes to capital gains tax? From 6 April 2020 the reporting requirements and payment deadline for gains on the sale of UK residential properties will change. Please refer to our previous blog post for more information.
For 2019/20 the capital gains annual exemption is £12,000. You may wish to crystallise gains up to this amount before 6 April. You could also consider transferring assets to your spouse to enable their annual exemption to be utilised.
Please let us know if you would like to talk to a specialist advisor about your tax saving strategy.
25th September 2020
A look at the key elements of Chancellor Rishi Sunak's Winter Economy Plan.
Read More11th September 2020
A look at what businesses can do to prepare for a potential second wave of coronavirus.
Read More30th July 2020
We explain why the changes to the Entrepreneurs' Relief lifetime limit might mean you should rethink your rental strategy.
Read More