The end of another tax year is close by. So if you haven’t already considered reliefs, exemptions and tax efficient investments, now may be the time to do so, for example:
- Use your personal allowance of £12,750 against your income.
- Be mindful of not losing your personal allowance if your earnings are bordering £100,000: your tax-free personal allowance, ie the portion of your earnings you don’t pay tax on, starts to shrink – reducing by £1 for every £2 earned over this threshold. By contributing to your pension, you can reduce your income, helping to maintain your personal allowance and letting you keep more of your money.
- Realise capital gains to make use of the annual exemption of £3,000.
- Gift income-generating assets to a spouse with a lower income.
- Claim the marriage allowance – The marriage allowance applies to couples where one partner does not pay income tax — or their income is below the £12,570 personal allowance — and the other partner pays basic-rate income tax. It could save you up to £252 a year in tax savings.
- Invest in tax efficient investments such as :
- ISA’s in which you can invest £20,000pa and where the income and any gains are tax-free.
- Also consider Junior ISA’s – children are allowed up to £9,000 pa – and Lifetime ISA’s – for those saving for their first home or future retirement.
- EIS which attracts income tax relief at 30% on a maximum annual investment of £1m (or £2m providing anything over £1m is “knowledge intensive”) and are potentially capital gains tax relief.
- SEIS which attracts income tax relief at 50% on a maximum annual investment of £200,000.
- Make pension contributions – You can pay up to £60,000 into your pension each tax year and receive tax relief, although the annual allowance is tapered for higher earners. You can also use the carry-forward rule, which allows you to use any unused allowances from the previous three years.
- Pension contributions can also help retain benefits such as your personal allowance and child benefit.
- Consider salary sacrifice in exchange for a pension contribution.
- Rent a room in your home: £7,500 is tax-free.
- Use Gift Aid to make charitable donations.
- Check your tax code. If your tax code is wrong, you could be paying thousands of pounds of extra tax to the taxman. Sometimes people are on the wrong tax code if they change their job or their salary goes up or down. If you think you have overpaid tax through PAYE in the current tax year, you should tell HMRC before the end of the tax year. There’s more information on gov.uk about how to claim a tax refund.
- Check your child benefit. From 6 April, the rate for your eldest or only child went up to £26.05 a week – while the rate for other children rose to £17.25 a week. But parents must watch out for the high income child benefit charge, as they currently lose the payments when they earn over £60,000.
- Use IHT annual exemptions. The most well-known is the ‘annual exemption’, allowing you to make a £3,000 gift. Crucially, this allowance can be carried forward – so, you can make a £6,000 gift should you have the allowance remaining from last year.
- Update Wills and estate planning, especially in the light of the forthcoming IHT rules changes.
If you’re unsure about anything please ask. Of course, individual circumstances differ and you should always take professional advice before proceeding.