As the deadline for submitting your 2018-19 tax return has passed, now is a good time to focus on the 2019-20 tax year. It is important to carry out an annual review and ensure that you have planned properly for the current tax year. This includes exploring any tax saving strategies that are available before the current tax year ends on 5 April 2020.
A number of readily available saving strategies are mentioned below:
- Tax relief for contributions to pension schemes is given at your highest marginal rate of Income Tax. You can get tax relief on private pension contributions worth up to 100% of your annual earnings subject to the £40,000 annual cap and £1,055,000 lifetime allowances. The income and gains which arise as part of your pension savings are generally exempt from Income Tax and CGT.
- Donations to charity over the course of a tax year can add up and you should ensure that you keep a proper record of all donations made and declare them on your return. Donations that are made through the Gift Aid scheme allow for the recipient charity to claim 25p worth of tax relief on every pound donated. If you are a higher rate or additional rate taxpayer, you are eligible to claim additional tax relief on the difference between the basic rate and your highest rate of tax.
- There are business tax reliefs that may be available on certain expenses incurred in running your own business or if you use your own money to travel or buy things for your job.
- If you are married or in a civil partnership, there may be opportunities available to transfer income producing assets to your spouse or partner, especially if they pay tax at the lowest marginal rate. Of course, there are anti-avoidance provisions and wider issues of gifting assets that will need to be considered.
- Consider your CGT position especially if you are contemplating the sale of a residential property in the near future on which CGT will be due. Changes coming into effect from 6 April 2020 mean that accelerating the sale to before 6 April 2020, will extend the time you have to report the gain and pay any tax due.
- Your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that if your taxable income exceeds £100,000 this will result in a reduction in personal tax allowances and marginal rates of tax due may be as high as 60%.
- It is also worth remembering that whilst the amount invested in an ISA does not benefit from tax relief, the income and gains are free from most taxes including Income Tax and CGT. Withdrawals can usually be made at any time without the loss of tax relief.
If you have not considered your tax planning options for 2019-20, now is a good time to pick up the phone and speak to us. Once the end of the present tax year passes, 5 April 2020, 90% of tax planning options expire.