Practical meets fashionable in the world of tax

The current “phase” of fashion in the tax world is good, solid, traditional tax planning and this article concentrates on providing you with some very fashionable taxation tips for individuals.

Personal Tax

The 2015-16 personal allowance has increased to £10,600. It is important that this tax free allowance is utilised. For married couples and civil partners this can often be achieved by holding investments and rental properties in joint names.

Consider the levels of salary and dividends extracted from a family company to minimise higher rate income tax and national insurance contributions. Give some thought to how this affects your individual income for mortgage purposes and the impact on your company credit rating.

Avoid any Child Benefit claw-back by ensuring that the spouse with the largest income is below £50,000. A sliding scale claw-back operates where income is between £50,000 and £60,000.

Capital Gains Tax (CGT)

Utilise the current year annual CGT exemption by 5 April 2016 which provides tax-free gains up to £11,100 per individual (£22,200 per married couple)

Consider transferring assets into joint ownership of husband and wife before disposal to ensure each spouse’s exemption is not wasted

Once an individual’s capital gains for 2015-16 reaches £11,200 consider deferring any further asset disposals until after 5 April 2016. This allows a fresh annual exemption to be accessed for 2016-17 and also defers by 12 months any resulting CGT payable.

Inheritance Tax (IHT)

This is often described as an optional tax. It’s one that needs some thought and some very simple measures may help in removing your estate from being chargeable to IHT.

Consider making lifetime gifts to ensure that exemptions only available during lifetime are utilised on a regular basis. The exemptions currently available include the £3,000 annual donor exemption, regular gifting out of income, £250 small gifts exemption and marriage exemptions up to £5,000.

Lifetime gifts in excess of any exemptions will only be potentially liable to IHT where the donor dies within seven years of making such gifts.

For married couples, ensure on the second death any unused nil rate band from the death of the first spouse is claimed. This means that an estate up to £650,000 in value is free of IHT.

Tax Advice

This is a generic tax planning list to apply to individuals. We would be pleased to have the opportunity to fashion some tax planning advice to individuals or businesses.  For further information, please contact James Sewell on 01522 531341 or email him at james.sewell@wrightvigar.co.uk