Year end Tax Planning – 5 April 2019
Our Ideas on how to reduce your tax bill
We have summarised a list of tax tips to consider prior to 5 April 2019. With just over a week to go, this is the best time to review your finances, and look at the most efficient way to make use of your allowances. Tax advice should be sought prior to implementing any of the suggestions. Please do get in touch with us if you require any more information.
If you are a basic rate tax payer (20%) for every £80 you put into your pension, the government contributes another £20. The restriction to contributions made by high earners (net income of more than £110,000) continues to apply, however if you are a higher rate taxpayer (40%) for every £60 you put in, you can get £100 into your pension as there is an additional tax relief available for higher rate tax payers. Please note that there is an annual limit of £40,000 you can contribute.
Personal Savings Allowance
Higher rate taxpayers will be able to earn up to £500 tax-free, whilst basic rate taxpayers are enabled to receive the first £1000 of interest tax-free.
The tax-free allowance is currently £2,000. If it can be controlled, ensure that at least a £2000 dividend has been declared per shareholder before 6 April 2019. It is also worth noting that the effect of the personal allowance and the basic rate band means that it is possible to receive up to £50,000 of income, without paying higher rates of tax from 6 April 2019. However, with the increase in limits from NI (12% taxable rate) part of this benefit will be lost.
Capital Gains Tax
You have an annual allowance of £11,700 for capital gains in 2018/19. You cannot carry forward this exemption, so it is a good idea to make use of it to reduce your future liabilities. This will increase to £12,000 on 6 April 2019.
Depending on your personal needs, there are many ISAs to chose from, including the LISA (Lifetime ISA) and Help-to-Buy ISA. Whilst the ISA limit for 2019/20 will remain the same, the Help-to-Buy ISA will become unavailable from 30 November 2019. The new LISA allows anyone up to the age of 40 to invest £4000 per year and the government will contribute £1000 per year. This option is great for any parents who have grown up children saving for a house.