Spring cleaning or Tax Planning?

If you are just congratulating yourself for having filed your 2014/15 return on time, and planning to forget about tax for another year, then please pause for a moment to read this article.  There are quite a few things you can do before 6^th April to ensure that you benefit from the various tax allowances and reliefs available, and the Spring cleaning will wait.

If you are a basic rate taxpayer with a spouse who doesn’t use all of their personal allowance, ask them to apply for the Marriage Allowance before 6 April.  This will transfer £1,060 of their personal allowance to you, saving up to £212.  If you have income over £100,000, your own personal allowance will start to be withdrawn. You could consider transferring income yielding assets to a spouse with lower income, or perhaps making pension contributions to reduce your taxable income.

Whilst on the subject of pensions, it is worth noting that from 6 April 2016, the level of contributions that can benefit from tax relief in a year will reduce on a sliding scale for those with income in excess of £150,000. It is therefore worth maximizing your contributions this year.  Due to the proposed alignment of all pension input periods with the tax year from 6 April 2016, the transitional rules created two pension input periods in 2015/16 therefore giving an annual allowance of up to £80,000. However a maximum of £40,000 can be invested between 9 July 2015 and the end of this tax year.

In terms of investments, the perennial advice is to top up your ISA if you have not used your annual maximum of £15,240. Additionally this year if you are planning to buy your first home or have adult children who are, it is worth considering the new help-to-buy ISA available from Autumn 2015.  This allows you to deposit up to £1,200 in the first month and up to £200 a month thereafter and when you buy your first home, your solicitor can apply on your behalf for a government bonus of 25% of your savings, up to a maximum bonus of £3,000.

You may have heard that the way dividends are taxed is changing from 6 April, with the abolition of the dividend tax credit, the introduction of a £5,000 dividend allowance and a new higher dividend tax rate for every band. If you own your own company, you need to consider carefully whether bringing dividend payments forwards will reduce your overall tax bill. Unfortunately the answer will not be the same for everyone, as it will depend on your mix of income and whether bringing forward income will push you into a higher rate band.

If you are buying a second home or a buy-to-let, completing before 6 April could save you a lot of money.   A 3% stamp duty land tax surcharge will apply to ‘additional’ properties from 1 April 2016. This increased rate will also apply to companies.

I hope you have found something of interest in this article.  However it only covers a few of the ways in which our personal tax advisers could help you to save money.

If you would like to discuss your individual circumstances in more detail please contact us on 0845 880 5678 or email action@wrightvigar.co.uk