End of Year Tax Saving
It s not very long before the end of the tax year approaches. It is important to make use of any personal allowances and tax breaks that are useable.
By using the annual allowances and exemptions you will bring down your tax charge considerably. This can normally be done promptly and easily with the help of a financial adviser.
Tax effective investing
Individual savings accounts
Individual Savings Accounts (ISAs). If you are aged over fifty your Isa allowance for the current tax year is now £10,200. ISA’s are free from capital gains tax, can be used to provide a regular income and are one of the most tax efficient investments available
Pensions
Pensions are also a tax efficient way of planning for retirement. Most individuals can pay up to 3,600 gross each year and obtain basic rate tax relief on the contribution. Forty percent taxpayers can claim the residual on their self assessment.
Capital Gains Tax Opportunities
If you have made profits on certain types of investment you may be able to use your yearly capital gains tax allowance. This will allow you to make gains up to this level without incurring a liability to tax. In some cases it is also possible to carry forward previous year’s losses.
Income Tax Opportunities
Each individual can receive a personal allowance of £6475 without acquiring any income tax. For espoused couples or civil partnerships, where one is a forty percent taxpayer it is worth looking to see who owns the investments and perhaps look to transfer assets into the
basic rate taxpayers name.Making gifts is also a means of cutting your liability to income tax.
Saving IHT
Each person can make an IHT exempt gift each year of up to £3000 in a tax year. Any unused allowance can be carried ahead for one year only. If you are capable to make gifts out of income without it altering your standard of living you may be allowed to make gifts over the yearly exemption level.
If you believe your estate could be in excess of the IHT nil rate band then effective tax planning can be employed to bring down your estates potential inheritance liability. This could be a suitably drafted will or instead trust planning.
Graham Bond is a Financial Advisor based in Bristol.
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