Plan Now To Minimise Your 2014/15 Tax
Posted on 04/03/15
The end of Tax Year 2014/2015 is looming, but there’s still time to make sure you’re on track to minimise tax for the current year. The following tips should help you on the way to examining what you can potentially do to keep your tax bill as trim as possible.
Use Your Pension Contributions Your pension provision is important for your future and can reduce your tax burden today. Utilise your employer contributions to build a retirement fund. Personal contributions to pension schemes attract tax relief at your highest rate. For tax relief against your 2014/15 income, you must pay pension contributions on or before 5 April 2015. The basic annual allowance cap on pension savings is £40,000 for 2014/15. The basic annual allowance cap on pension savings is £40,000 for 2014/15.
The proposed pension legislation changes, that have not yet been confirmed, may make a difference to the amount you can put into your pension scheme. It is proposed that if you start your draw down post 5th April 2015 your annual allowance for contributions will be capped at £10,000 however if you start prior to 5th April 2015, even drawing down a nominal amount, you retain the £40,000 annual allowance. You should speak to your IFA about this.
Use Your CGT Allowance Utilise your Capital Gains Tax allowance; when you dispose of assets, only the profit is taxable (the ‘gain’). For individuals, gains in 2014/15 under £11,000 are tax free. For married couples, that’s a total of £22,000 of tax free gains each year to take advantage of.
Become A Savvy Saver Interest earned on cash New Individual Savings Accounts (NISAs) is tax-free – you don’t have to declare them on your tax return. Higher-rate taxpayers don’t have to pay any further tax on dividends from investments and there is no capital gains tax to pay when you sell shares or units held in a NISA.
From 1 July 2014 the NISA allowance rose to £15,000. From 6 April 2015, it has increased again to £15,240 and can be utilised as all cash, all stocks and shares or alternatively, can be split between the two. This means married couples, for example, could put up to £30,000 between them into NISAs this tax year (before 5 April), and a further £30,480 from 6 April.
Parents can also utilise Junior NISAs which have replaced Child Trust Funds. Consider using them as a long-term savings option for a children’s future and a very tax efficient way of making gifts to them. In the tax year 2014/15, the Junior NISA allowance is £4,000. This will increase to £4,080 in April 2015.
Shift Assets Around Married couples should consider transferring assets between them. The rules are complex and no one size fits all, but seek advice as there may be benefits for income tax, capital gains tax and even inheritance tax.
Check For Payslip Errors HMRC can make mistakes, so check your payslip details. Check that your name, address, National Insurance number, employer’s name and your tax code are all correct.
Age Pays Don’t forget that age pays. If you were born before 6 April 1948, check if you are eligible for an increased personal allowance.
Give Generously If you give to charities, be Gift Aid aware. The scheme enables charities to reclaims tax on any donations made by UK tax payers. In turn, there are benefits to certain individuals, for instance people over 65 and higher rate tax payers.
Get A Plan For IHT There’s scope to minimise Inheritance Tax (IHT) too. The current allowance is £325,000. IHT only applies above this threshold and at a rate of 40%.
Transfers between married couples are exempt from inheritance tax, inter-spouse gifts made in the seven years prior to death can be ignored, and if the nil-rate band is not used on the first death it can be used on the second death.
Look into Gifting and Lifetime Transfers, as well as writing your assets into Trusts; the rules are complex so seek professional advice. Life assurance can be used as a way of removing value from an estate and also as a method of paying inheritance tax liabilities.
Above All, Get Help and Get A Plan But if it all seems like a maze, a good accountancy firm, like Wilkins Kennedy, can help you look at your particular circumstances and create a plan. Wilkins Kennedy has developed a year end personal tax planner which helps you to identify the planning opportunities that should be reviewed before the end of the current tax year. Also we have included in section 6 details of some changes which have been announced and come into effect for 2015/16’. - See more at: Wilkins Kennedy website