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Sestini & Co | on Sat, 03/14/2015 - 20:06 | In
Uncategorized Spring is in the air, and with the end of the tax year rapidly approaching now is the perfect time for a spring clean of your finances and an opportunity to make use of this year’s allowances before the 5th April deadline. With expertise in personal tax planning, estate planning and overseas tax, Rachel Sestini shares her ten tips for end of year financial planning:
1. Make use of your Capital Gains Tax (CGT) allowance of £11,000 for the year. If you haven’t already used you CGT allowance consider selling some holdings or transferring them to your spouse to fund a more tax efficient investment such as an ISA or pension. Time really is of the essence this year though because with the end of the tax year falling on Easter Monday, Thursday 2nd April is the deadline for trading.
2. Top up your ISA now. You have until midnight on 5th April to invest £15,000 tax free in 2015. Use your allowance now or lose it forever. It’s worth remembering that if you have a stocks and shares ISA you only need to transfer the money into your ISA account by the deadline. You can make your trades at a later date.
3. Fill your pension pot. Not only can you invest £40,000 per year into your pension tax free, you can also make use of the previous three years’ allowances if you haven’t already done so, making a possible tax free investment opportunity of up to £190,000. This can be particularly useful if your income is just above the higher rate tax threshold, if you are in the range for losing child benefit or your personal allowance is being phased out or lost.
4. Invest in your children. Junior ISAs allow you to save an extra £4,000 per year tax free. In addition to this 16 and 17 year olds also qualify for the full ISA allowance making a combined investment of £19,000 possible. Children can also have their own stakeholder pensions with an additional gross investment of £3,600 (of which the government pay 20%)
5. Gifting money each year makes wise financial sense if your estate is likely to be valued above £325,000, and if you own your own home this is probable. As well as being able to gift unlimited amounts out of this year’s excess income, you can give away £3,000 each year of your capital without incurring inheritance tax (IHT) now or in the future. You can also roll the previous years’ allowance over to a maximum of £6,000 and therefore a married couple or civil partners can gift up to £12,000.
The news is even better if someone you love is planning a spring wedding. Parents can give a child £5,000 IHT free, your grandchild could receive £2,500 and you can give £1,000 to anyone else on the event of their marriage. The money must be promised or given on the wedding day or shortly before.
6. If you’re an experienced investor then Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS) offer some tempting tax breaks. For example, with VCTs You can invest up to £200,000 per year, dividends are tax free, and you pay no CGT when you sell. However, you must hold on to your investment for 5 years to qualify and these small, expanding companies can be high risk, so good financial advice is key to success.
7. Leave the country! It’s a big decision to make, but becoming non-resident may have major tax advantages for you. Our experience in international tax means we’re well placed to give you the best advice if you are considering a move abroad for business or personal reasons. Timing can be key in ensuring you maximise the planning opportunities available from a move.
8. If your spouse is a lower rate tax payer then transferring assets into their name can reduce your tax bill. Moving assets between spouses is exempt from CGT and will not incur IHT. Sestini and Co can advise on all aspects of family tax planning.
9. Salary sacrifice can be well worth considering even if you’re a basic rate tax payer. Schemes like childcare vouchers or season ticket loans can both reduce and spread the cost of these essentials as well as saving you and your employer national insurance contributions.
10. And finally, if you claim the state pension there are a few extra perks to be aware of. If you were born before 6 April 1948, you may be entitled to a higher tax allowance of £10,500, or £10,660 if you’re 75 or over. And if you’re still working, make sure you’re not paying National Insurance!
