With the end of the 2017/2018 tax year approaching you may want to make sure you have considered and where possible made use of the available allowances and exemptions, before the end of the current fiscal period (5th April).
The Personal Allowance for 17/18 is £11,500. The allowance reduces by £1 for every £2 income above £100,000 meaning the allowance is lost for those with income over £123,000. If your income is over £100,000 you could consider making pension contributions to reduce your taxable income which may give you some or all of your Personal Allowance back.
For some married couples it is also possible to transfer a proportion of this allowance from a non-tax paying spouse to the basic rate tax-paying spouse providing an annual saving for the taxpayer (currently £230).
The dividend tax free allowance is currently £5,000 but will reduce to £2,000 from 6 April 2018. It is worthwhile considering whether any shareholdings could be transferred to a tax-free investment to remove the income from the dividend income regime. ISA and CGT limits may be relevant here.
Pension Tax Benefits
Making pension contributions can be a tax-efficient way to save; higher or additional-rate taxpayers could get 40/45% tax relief on their contributions.
You can contribute up to £40,000 annually (depending on your income). If your income is more than £150,000 the amount you can contribute will be abated. If you haven't used any of your pension allowance in the last three years, you can carry your allowance forward, so potentially £120,000 could be contributed.
Child Benefit is reduced by a tax charge when one parent's income reaches £50,000 and it stops completely at £60,000. For those earning between these two figures or marginally in excess of the upper limit, making a pension contribution reduces the tax charge.
The ISA allowance for 17/18 is £20,000, and this is a "use it or lose it" allowance so cannot be carried forward.
Shares can be sold and re-purchased within the ISA to utilise the ISA investment allowance while removing the value of the shareholding along with the resulting income produced from the Capital Gains Tax and Dividend tax regimes. (CGT would need to be considered on the sale to the ISA though).
Capital Gains Tax
The capital gains tax exemption is currently £11,300. This is the amount of gains that can be realised from sales of capital assets and so it is worth considering whether any disposals should be made before 5 April to ensure the exemption is utilised.
The annual lifetime gifting exemption is £3,000. Unused exemption from the previous year can be carried forward meaning a potential £6,000 could be gifted prior to 5 April without the gift giving rise to an inheritance tax charge. Other exemptions are also available and include small gifts (up to £250), wedding gifts (up to £5,000), and regular gifts from surplus income in certain circumstances.
Get in touch
If you require any assistance in relation to personal taxation, please get in touch.