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What should I be doing to prepare for the end of the personal tax year?

My Mate says… ‘I should start preparing for the end of the personal tax year’.

The end of the personal tax year is the 05/04/2020 and now is the time to ensure that you utilise any available tax allowances and/or exemptions. Failure to do so may result in you losing it for the 2019/2020 tax year.

Pensions:

Make sure you fully utilise your annual allowance, usually this is £40,000 however it can be reduced if your income exceeds £150,000.

If you haven’t utilised your annual allowances for the last 3 tax years, you can utilise them this tax year. For example, you could utilise any unused allowances from the following tax years – 2016/2017, 2017/2018 & 2018/2019 before 06/04/2020.

Pension contributions can be made by your Limited company and it will receive Corporation Tax relief on the total amount paid into your pension.

Charitable donations:

Making charitable donations may entitle you to Tax relief. A higher rate or additional rate taxpayer could relief tax relief on their charitable donations.

Capital Gains Tax:

When you dispose of an asset, Capital Gains Tax may be due on the profits of the disposal. Every tax year you have a Capital Gains Tax annual exemption (£12,000 for 2019/2020). If you are planning on making a disposal soon and haven’t yet utilised this exemption, you will need to do so before 06/04/2020. You may wish to sell part of your asset to utilise the annual exemption in 2019/2020 tax year and then dispose the remaining asset on or after 06/04/2020 to utilise the 2020/2021 tax year’s annual exemption.

Lettings relief:

Lettings relief is being abolished from 06/04/2020, this relief gives you Capital Gains Tax relief on the disposal of your property that has been let out. If you dispose of this property on or after 06/04/2020, you will have additional tax to pay.

Tax efficient investments:

Investing in a tax efficient scheme can provide you with up to 50% tax relief.

Scheme Tax relief* Investment limit
EIS 30% £1,000,000
SEIS 50% £100,000
VCT 30% £200,000

*Criteria to be met in order to receive the tax relief.

Other benefits for these schemes include loss relief and defer gains on disposal of other assets into EIS.

 

Inheritance Tax – Gifts:

Every tax year you are given an annual exemption allowance of £3,000 for inheritance tax. This annual exemption allows you to gift this amount without any Inheritance Tax implications. If you haven’t utilised last tax years allowance of £3,000 (2018/2019 tax year) then you also utilise this before 06/04/2020, giving you a total £6,000.

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have used another exemption on the same person (For example, the £3,000 exemption above)

ISA’s:

Every tax year you have an ISA allowance for 2019/2020 it is £20,000, which can be invested in cash ISAs, UK stocks and shares ISAs, foreign share ISAs and other permitted ISAs.

Dividends:

You can have £2,000 of dividends each tax year, tax free. Thereafter they are taxed at 7.5%/32.5%/38.1% depending upon your other income.

You may wish to ensure that you have utilised your dividends at 7.5% before the end of the tax year to take advantage of the low tax rate.

Please contact us if you have any queries about your personal situation or would like a pre-tax year full review at enquires@advaloremgroup.uk or 01908 219100.

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