HM Insights

Do You Need to Assess Your Tax Affairs Before the Tax Year End?

With the end of the 2016/2017 tax year fast approaching (5th April) you might want to consider making the most of the following reliefs or allowances before they are lost.

ISA Allowance

Each individual can invest up to £15,240 each year into a tax free ISA, whether a cash ISA, a stocks and shares ISA and/or an innovative finance ISA. If the Allowance is not used in any one year it cannot be carried forward but is instead lost.

Tax Return Year End Lawyer 5 April Reliefs Allowances Scotland Year End

Pension Contributions

Pension contributions should be paid before 6th April if you want to make use of the available tax reliefs for the current tax year. Tax relief is available on contributions of up to £3,600 for people with earnings below this amount, OR, 100% of relevant earnings (capped at £40,000). This is reduced for those with taxable income over £150,000, with broadly speaking every £2 of income over this figure reducing the annual allowance by £1.

Where the £40,000 limit is not fully used, it may be possible to carry the unused amount forward for up to three years.

Dividend Relief

Many shareholders in small companies will wish to use the 2016/2017 tax free dividend relief. There is currently a dividend tax free allowance of £5,000 which is due to be reduced to £2,000 with effect from 6th April 2018.

Inheritance Tax: Annual Gift Exemption

If you are considering making any gifts in the near future you should think about doing this before the tax year end so as to make full use of the your annual exemption. The annual exemption allows up to £3,000 of gifts to be made each year with such gifts falling out of account immediately, instead of staying on the tax clock for 7 years. Any unused exemption from the previous year can also be used, meaning that you could have an exemption of £6,000 available to you. You can also give as many gifts of up to £250 per person as you want during the tax year as long as you haven't used another exemption on the same person.

Inheritance Tax: Residence Nil Rate Band

It might be worth reviewing your Will to make full use of the new Residence Nil Rate Band. An additional £100,000 exemption becomes available to everyone with effect from 6th April so long as the rules applicable to the exemption are met. The exemption is tapered for estates with a net value of more than £2million.

Capital Gains Tax – use your annual exemption

The annual exemption for 2016/2017 is £11,100, and works on a use it or lose it basis. The allowance will not be carried forward so if you have sales to make, perhaps to funds an ISA, or similar,  it makes sense to make use of this allowance where possible.  

Get in touch 

If you'd like to discuss these, or any other allowances, please get in touch with your usual Harper Macleod contact.