9th February 2012
PKF (UK) LLP – Top Ten Tax Planning Tips for the Year End
Don’t miss out on opportunities to reduce your 2012 tax bill before the end of the tax year
The current tax year ends on 5 April 2012 so now is a good time to look at your finances.
Here are some top tips of things to consider:
• Use your personal allowances wisely
Married couples and civil partners could consider boosting their after tax family income by maximising the use of personal allowances and the 20% and 40% tax bands. This can be achieved by transferring income producing assets to a lower earning spouse, providing the transfer is outright and unconditional, or employing a spouse, civil partner or child in the business, providing the salary paid is commensurate with the work carried out.
• Use your other annual allowances
All taxpayers considering disposing of assets standing at a gain should make sure to utilise their £10,600 capital gains tax exemption. Taxpayers should also consider accelerating any planned gifts to utilise the £3,000 inheritance tax exemption before the end of the tax year.
• Pension contributions
New rules which came in from April 2011 mean that you could potentially contribute up to £200,000 in the current tax year. Pension contributions are relievable at your marginal rate so could result in a tax saving of up to 50%.
• Charitable giving
All taxpayers can make gifts to charities by means of Gift Aid, which provides further income for the charity and tax relief for the donor at their marginal rate of tax.
• Maximise capital allowances
For businesses, it may be worth bringing forward any intended capital expenditure to before 5 April 2012 to maximise the annual investment allowance. After 5 April this reduces from £100,000 to £25,000.
• Check if you will be UK tax resident for the year
If you do not spend the whole of the year in the UK, you may not be resident here for tax purposes. To ensure you are not tax resident for 2011/12, you should check you total number of days here now.
• Consider income on let properties
There may be scope for landlords to reduce the tax they will pay on rental profits by releasing equity in the property.
• Furnished holiday lets
Now is time to consider whether you will meet the new qualifying conditions which apply from 5 April 2012. There could be tax advantages in selling or gifting the property now, while certain capital gains reliefs are available.
• Check how much your company car benefit is costing
With increased measures to reduce carbon emissions, company cars are becoming more and more expensive. Now is the time to consider whether a company car is still beneficial.
• Check eligibility for child tax credits
For those with children under the age of 19 check your eligibility for child tax credits. If a claim can be made, an application should be made immediately as claims can only be backdated by up to 3 months.
• Update your Will
Regularly reviewing and updating Wills as financial and family circumstances change is the best way for all individuals to manage their family’s inheritance tax exposure.
• Review your investments
Make sure to use the full ISA allowance before the end of the tax year. Also consider making use of the new Junior ISA (JISA) available for individuals under 18 from 28 November 2011.
• Consider drawing tax-free income instead
You may be able to replace taxable income with tax-free ‘income’. Also check if you could benefit from switching your investments to assets that yield either a tax-free return or capital growth. For taxpayers over 55, it may be possible to start to draw on the tax-free element of a pension fund, without ceasing work or taking the taxable element.
And lastly don’t forget to check your 2012/13 PAYE codes which are currently being issued to ensure you don’t pay too much tax next year!
For more information, please contact Denise Roberts on 029 2064 6200 or email denise.roberts@uk.pkf.com.