Last minute tax planning
As the end of the tax year swiftly approaches and you realise that you have left your tax planning to the last minute, there may still be a couple of things you can do to reduce that dreaded tax bill.
Year end tax planning opportunities
Each person has a personal allowance, this is an amount of tax free income that an individual can receive. For 2018/19 the allowance is £11,850, so ensure this is utilised to its full potential.
Do not forget that where the income of one spouse/civil partner is low it may be possible to transfer £1,190 (for 2018/19) of the personal allowance to your spouse/civil partner.
Please note special rules apply to individuals with income over £100,000
Donations to UK registered charities extend the basic rate tax band which in turn increases the amount of income that can be taxed at the basic rate (currently 20%).
However, if you have not paid enough tax to cover the tax that the Charity would claim on your donation you will be required to meet the shortfall.
Donation made in the following tax year can be carried back to a previous year which should give you time to calculate your liability and make a donation if required.
Contributions of up to £3,600 gross per year can be made by individuals with no taxable income.
Those with income can usually make larger contributions (up to £40,000) and potentially gain further tax relief but advice should be sought in relation to net relevant earnings, the annual and lifetime allowances, otherwise the contributions may not generate the desired tax relief. You should always seek specialist advice if investing into any regulated product.
Capital Gains Tax (CGT)
Each person has an annual exempt amount for CGT. For 2018/19 this is £11,700
Any unused annual exemption cannot be carried forward or back to a different tax year and are lost.
Each spouse/civil partner can usually transfer assets between themselves without incurring any adverse tax charges prior to the disposal of assets and can therefore utilise both personal allowances to save up to £3,276. Care should be taken with assets that attract stamp duty land tax so as not to trigger a charge inadvertently.
If you have a pending chargeable disposal this could be beneficial.
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There are a limited number of transactions to which the 3% SDLT surcharge may not apply.
It is estimated that over £2bn was overpaid in SDLT in 2018, make sure you have not overpaid and if you have you may be able to claim a SDLT refund?
There is a £3,000 annual exemption each tax year that an individual can use to make a gift without any IHT implications. If the previous tax year’s exemption was not used it can be rolled forward and also be used but only in the following year.
Overpayments to HMRC
If your taxable income has reduced or changed significantly and you have made payments on account during the year. You should check to see if these can be reduced to provide a cashflow advantage. If you have overpaid a refund can be requested from HMRC.
Completing your tax return early will ensure that your final tax liability is calculated and may result in a refund (if not you will at least know your liability and have plenty of time to make provision for your upcoming payments).
Planning earlier may yield many more reliefs and planning opportunities so our advice is to never leave your tax planning to the last minute.