{"id":256,"date":"2020-03-04T07:00:54","date_gmt":"2020-03-04T07:00:54","guid":{"rendered":"http:\/\/www.a1-financial.com\/blog\/?p=256"},"modified":"2020-02-28T14:04:41","modified_gmt":"2020-02-28T14:04:41","slug":"top-4-tips-for-good-tax-planning","status":"publish","type":"post","link":"https:\/\/www.a1-financial.com\/blog\/top-4-tips-for-good-tax-planning\/","title":{"rendered":"Top 4 tips for good tax planning"},"content":{"rendered":"

What should I consider before the end of this tax year?<\/strong><\/p>\n

The end of the 2019\/20 tax year is fast approaching, and there are a number of valuable allowances and reliefs that will be lost if they are not used before the deadline.<\/p>\n

These opportunities include, but are not limited to, these four important areas of tax planning that should be considered. We\u2019ve summarised these allowances below and suggest that if appropriate to your particular situation, these areas should be reviewed before 5 April 2020.<\/p>\n

1. Take your ISA contributions to the max<\/strong><\/p>\n

The term ISA stands for \u2018Individual Savings Account\u2019 and allows you to save tax-efficiently into a cash savings or investment account. With a Cash ISA or a Stocks & Shares ISA (or a combination of the two), you can save or invest up to \u00a320,000 a year tax-efficiently. Your ISA allowance doesn\u2019t roll over into a subsequent tax year, so if you don\u2019t use it, you\u2019ll lose out forever.<\/p>\n

If you are in a position to, it may make sense for you and your spouse to take advantage of each other\u2019s ISA allowance, particularly if one of you has more financial resources than the other. That way, you can save (in the case of Cash ISAs) or invest (in the case of Stocks & Shares ISAs) up to \u00a340,000 tax-efficiently in the current tax year.<\/p>\n

Also, 16 and 17-year-olds actually have two ISA allowances, as they\u2019re able to open a Junior ISA (once they have transferred their Child Trust Fund [CTF] to their Junior ISA and closed the CTF), which for 2019\/20 has a limit of \u00a34,368, as well as an adult Cash ISA. This means that you could put away up to \u00a324,368 in your child\u2019s name tax-efficiently this tax year.<\/p>\n

People aged 18\u201339 can open a Lifetime ISA, which entitles them to save up to \u00a34,000 tax-efficiently a year until they\u2019re 50. The Government will top up the savings by 25%, up to a maximum of \u00a31,000 a year. <\/p>\n

Viewing yours and your spouse\u2019s allowance as one will allow you to make the most of these tax advantages.<\/p>\n

The value of investments can fall as well as rise. You may not get back what you invest.<\/strong><\/p>\n

2. Make the most of your pension tax reliefs<\/strong><\/p>\n

Now is also the time to check you are taking full advantage of your pension tax reliefs and allowances. Normally, between you and your employer, you can contribute a maximum of \u00a340,000 into your pension in a tax year (called your \u2018annual allowance\u2019) before it becomes subject to Income Tax. It\u2019s important not to exceed this limit \u2013 which is set at either 100% of your salary or \u00a340,000 (whichever is lower). However, for high earners with a taxable income of more than \u00a3150,000 per year, this is tapered downwards.<\/p>\n

If you don’t manage to make full use of your \u00a340,000 pensions annual allowance this tax year, you can carry it forward for up to three years. For example, in the current 2019\/20 tax year, you could carry forward unused contributions from 2016\/17, 2017\/18 and 2018\/19, but the clock re-starts on 6 April this year.<\/p>\n

You could get some of your allowance back by increasing your pension contributions, as the income on your tax return will be lower to take your extra pension contributions into account.<\/p>\n

You can also increase your basic State Pension by making voluntary Class 3 National Insurance Contributions (NICs).<\/p>\n

3. Tackle the ongoing issue of Inheritance Tax<\/strong><\/p>\n

Inheritance Tax (IHT) is usually payable at 40% on the portion of an estate that exceeds the \u00a3325,000 nil-rate band (NRB). Like the NRB, the unused percentage of the residence nil-rate band (RNRB) can be transferred between spouses and registered civil partners.<\/p>\n

The RNRB is on top of the NRB allowing individuals to pass on a qualifying residential property to their direct descendants. The maximum RNRB is \u00a3150,000 this year, and next year a couple will be able to combine their NRB and RNRB allowances to a pass on property worth \u00a31 million free of IHT. The RNRB is reduced by \u00a31 for every \u00a32 the value of the net estate exceeds \u00a32 million.<\/p>\n

You can act at any time to help reduce potential IHT. However, gifting money is an area that is subject to an annual limit, which runs from the start of the tax year, and could be worth adding to your year-end to-do list. Tax exemptions released through gifting should form a key part of IHT planning.<\/p>\n

The annual allowance means you can gift up to \u00a33,000 each year, exempt from IHT \u2013 so as a couple, you can make \u00a36,000 worth of gifts. It can also be carried forward for one year.<\/p>\n

You can give as many gifts of up to \u00a3250 to as many people as you like \u2013 that is, unless the person has already received a gift equating to the annual \u00a33,000 exemption. Some types of gifts, such as wedding gifts or gifts to help with living costs, can also be given tax-free. <\/p>\n

However, another factor to consider is the legislation around IHT, which could be subject to change in the near future. The Office of Tax Simplification is currently undertaking a significant review that could inform forthcoming policy decisions, so this year \u2013 before any changes come into force \u2013 reviewing your IHT plans, including gifting, should be a priority. <\/p>\n

This is a complex area with qualifying conditions and requires expert estate planning
\nadvice. <\/p>\n

4. Plan to reduce a Capital Gains Tax bill<\/strong><\/p>\n

Capital Gains Tax (CGT) is a tax on the profits you make when you sell something, such as an investment portfolio or second property. Everyone has an annual allowance before CGT applies of \u00a312,000 (in 2019\/20). <\/p>\n

The allowance is for individuals, so couples have a joint allowance for 2019\/20 of \u00a324,000. If appropriate to your particular situation, it\u2019s maybe worth considering transferring an asset into your joint names so you both stay within your individual allowances.<\/p>\n

Any gains in excess of the allowance are charged to CGT at either 18% (basic-rate taxpayers) or 28% (higher-rate taxpayers), depending on the individual\u2019s other total taxable income in the year the gain arises.<\/p>\n

An important thing to remember with this aspect of taxation is that any losses you make on sales can be offset against your capital gains for CGT purposes.<\/p>\n

Currently, CGT on the sale of a residential property, other than your main residence, is payable under self-assessment and will not be due until 31 January following the end of the tax year. This will change with effect from 6 April 2020, when payment of CGT from the sale of such a residential property will be required within 30 days of the date of sale\/completion. <\/p>\n

Make sure you don\u2019t miss the deadline to claim important allowances and reliefs<\/strong><\/p>\n

With less than two months remaining in the current 2019\/20 tax year, UK-resident individuals should turn their attention to any pre-emptive steps which may be taken by 5 April 2020 in order to optimise their tax position. Personal tax planning can be complex. You should always seek professional advice when undertaking a review to ensure all changes are processed and managed effectively. To discuss your position, please contact A1 Financial Solutions on 0131 347 8855 or email info@a1-financial.com.<\/p>\n

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.<\/strong> <\/p>\n

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE AND THEIR VALUE DEPENDS ON YOUR INDIVIDUAL CIRCUMSTANCES.<\/strong><\/p>\n

TAX RULES ARE COMPLICATED, SO YOU SHOULD ALWAYS OBTAIN PROFESSIONAL ADVICE.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

What should I consider before the end of this tax year? The end of the 2019\/20 tax year is fast approaching, and there are a number of valuable allowances and reliefs that will be lost if they are not used before the deadline.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"_links":{"self":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/256"}],"collection":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/comments?post=256"}],"version-history":[{"count":1,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/256\/revisions"}],"predecessor-version":[{"id":257,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/256\/revisions\/257"}],"wp:attachment":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/media?parent=256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/categories?post=256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/tags?post=256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}