The end of the tax year is looming but there’s still time to make sure you have used all your appropriate tax allowances, says Chartered Financial Planner Ruth Dolan.
“Whether you are a non taxpayer, basic rate taxpayer or higher rate taxpayer, there could be ways to improve your income by ensuring you are making use of all the available allowances and investments to your advantage,” adds Ruth, of Kent-based financial planning experts Taurus Financial Solutions. Ruth’s top tax tips include:
Income tax savings
Transfer savings into a tax free ISA to reduce income and capital gains tax. “You can invest up to £5,640 into cash ISAs. You can invest up to £11,280 into a stocks and shares ISA, restricted to £5,640 if you have used your cash ISA allowance too,” says Ruth.
Spouse to spouse
“Remember where one spouse is a non taxpayer, it can be advantageous to transfer savings or investments to them in order to make use of their personal allowances. Individuals under age 65 can earn income of £8,105 before tax is payable. For over 65s, this increases to £10,500 and for over 75s, £10,660. There is no capital gains tax when transferring investments between spouses,” she advises.
For those earning over £50,000 a year with children under age 16, you will lose part of your child benefit. Over £60,000 you will lose the entire child benefit allowance. “One way to avoid this is to make a pension contribution. You can contribute or a relative looking to make gifts, could contribute to your pension for you. The effect is to reduce your taxable income, preserving your entitlement to child benefit.”
Capital Gains Tax
Ruth says that if you have investments showing capital gains, it is prudent to manage these by making use of your annual capital gains tax allowance. Each person is able to make gains of £10,600 before tax is paid. “If you do not use the allowance, it is lost,” warns Ruth. “Where you have long term investments, it is worth making sure that your investments are reviewed to manage future tax liabilities.”
The threshold for inheritance tax will be frozen at £325,000 until at least 2019 so for those with potentially taxable estates, consider making use of the various exemptions available. Individuals can gift £3,000 per year or any number of small gifts up to £250 per person. “Those with high levels of surplus income against expenditure could arrange to make gifts out of income providing it is on a regular basis. There are also exemptions for making gifts on marriage for parents and grandparents and other relatives,” adds Ruth.
For more help with your personal financial planning, call one of our advisers on 01227 761177.