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Shape up your tax position before the year end

Posted by Arek Martirossian on 19 Mar 2014


“We’re nearly at the end of the 2013/14 tax year but there’s still time to shape up your tax position!

We’ve put together some useful tax saving opportunities to help you make the full use of the available tax allowances before 5 April.”

  1. Pensions: Have you used the carry forward rules in order to benefit from any unused allowances from the previous three tax years? This is generally the difference between £50,000 and the pension input each year. From 6 April 2014, the lifetime allowance for the amount you could save into pensions and receive tax relief will be reduced to from £1.5 million to £1.25 million. You need to apply for fixed protection before 6 April 2014 to continue to benefit from the higher lifetime allowance.
  2. Charitable donations: If you are a higher rate taxpayer make sure charitable donations are under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC. Note also that Gift Aid payments can be carried back for relief in the previous tax year.
  3. Reduction in personal allowance: For every £2 that adjusted net income exceeds £100,000 the £9,440 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.
  4. Maximise your tax free savings with an ISA: Individual savings accounts ISAs provide an income tax and capital gains free form of investment. The maximum investment limits are £11,520 in the 13/14 tax year. This can be comprised of up to £5,760 in cash with the balance from stocks and shares. You must make investment(s) by 5 April 2014 to take advantage of the limits available for 2013/14.
  5. Junior ISAs and pensions: In the 2013/14 tax year, you can invest £3,720 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.
  6. Capital gains: Have you used your 2013/14 annual exemption of £10,900? Consider selling shares where the gain is less than £10,900 before 6 April 2014. If you have worthless shares consider a negligible value claim to establish the capital loss. You may even to able to set off against your income.
  7. Enterprise Investment Scheme (EIS) investments: These give tax relief for investing in new shares in relatively small qualifying trading companies that are not listed on any Stock Exchange. 30% income tax relief is given on investments up to £1m and a further £1m if carried back to 2012/13 tax year. If you’ve made a capital gain that is taxable, it can be invested into EIS shares and the capital gain will be deferred for the life of the investment.
  8. Venture Capital Trust (VCT) investments: These investments also provide income tax relief of 30% on the amount subscribed for the shares up to £200,000 as well as tax free dividends.
  9. Inheritance tax (IHT): Have you made use of your annual exemptions? The general annual exemption is £3,000 (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.
     
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