End of year tax planning checklist

The end of the tax year means different things to different people. For many of our clients, tax is a huge burden. Therefore, we do our best to find solutions to enable our clients to live more comfortably, knowing that their tax is being managed accurately, efficiently and professionally.

One of the most difficult things about year-end tax planning is just how much there is to remember. That’s why our financial planners have put together this checklist, consolidating everything you need to consider into one resource.

1. Deferring income

  • The 14/15 and 15/16 tax year headline income tax rates are the same.
  • When total taxable income is between £100,000-£120,000, the personal tax allowance reduces gradually.

2. Spouses and civil partners

  • If you have a spouse/civil partner who pays tax at a lower rate than you do, consider transferring income to them prior to the end of the tax year.
  • Can you transfer a bank account unconditionally into their name?
  • Income and Capital Gains tax are tax-free in a NISA, so maximise its potential before the tax year is through.

3. New ISAs

  • On 1st July 2014, all existing ISAs became New ISAs (NISAs).
  • The overall investment limit was increased to £15,000.
  • “Stocks & shares” and “cash” ISAs are now identical, so you can invest partly cash and partly S&S, as long as the upper limit is not breached.

4. EIS and VCT

  • Perhaps subscribe shares in a Venture Capital Trust (VCT) under the Enterprise Investment Scheme (EIS).
  • VCTs of up to £200,000 include 30% flat rate income tax relief.
  • Investments of up to £1,000,000 in EISs qualify for 30% income tax relief.

5. Charity

  • Charitable donations may be made under the gift aid scheme.
  • The charity can thereby claim basic rate income tax direct from HMRC and additional tax relief of 20/25% can be claimed through your tax return, depending on whether you are a 40% or 45% taxpayer.
  • Shares and securities are also able to be gifted to charity before the end of the tax year, and it may be more tax-efficient for you to do so as they can often be donated free of CGT.

6. Pensions

  • The pension system is being unlocked on 6th April 2015, enabling pension holders to withdraw as much as they like at any given time – if they are 55 years of age or over.
  • The current annual allowance for 2014/15 is £40,000.

7. Capital Gains Tax

  • Most taxpayers are entitled to CGT exemption of £11,000 for 2014/15, so use it before the year-end.
  • CGT can be exempted by selling investments made in your name, and repurchasing them back via your SIPP, NISA or your spouse/civil partner’s name.
  • Could you defer a capital gain until after 5th April to postpone payment of CGT?

8. CGT Reliefs

  • If you have recently invested in a second home, you could make an election – within the 2-year time limit – to ensure CGT on the second property is at a minimum.
  • Entrepreneurs’ Relief is available to individuals selling their businesses – 10%.

9. Inheritance Tax

  • If possible, use your £3,000 annual exemption before the end of the tax year.
  • Any unused IHT exemption can be carried forward for only 1 year before it is lost.
  • Lifetime gifts may reduce your estate and therefore IHT. Generally, gifts to individuals are potentially exempt transfers, and are not subject to UK IHT if the donor survives for 7 years from the date of the gift.
  • Although not strictly related, you may want to check the contents of your will at the end of the tax year to ensure it meets your requirements.

10. Non-Domiciliary

  • Ensure that if you are not UK domiciled, your offshore funds are clearly separated, making it clear to the tax collector.
  • If you are reaching a key tax residence threshold (e.g. 17/20 years as a UK resident), seek tax advice on how to migrate your exposure to UK IHT.

11. The Budget

  • Tax is likely to feature on the Government’s next Budget, which will be announced on 18th March 2015.

If you are finding it difficult to implement any of our proposals, please don’t hesitate to get in contact with one of our helpful advisors, and we’ll do our best to give you the financial advice you require.