End of Year Tax Reduction Plans
It s not long before the end of the tax year draws near. It is crucial to make the most of any allowances and tax breaks that are obtainable.
By using the annual allowances and exemptions you might be able to reduce your tax bill substantially. This can commonly be done quickly and easily with the help of an independent financial adviser.
Tax effective investing
Individual savings accounts
Individual Savings Accounts (ISAs). If you are aged over 50 your Isa allowance for the present tax year is now £10,200. ISA’s are free from capital gains tax, can be used to provide an income and are one of the most tax efficient investment vehicles obtainable
Pensions
Pensions are also a tax effective way of planning for retirement. Most people can contribute up to 3,600 gross each year and obtain basic rate tax relief on the contribution made. 40% taxpayers can claim the residue on their self assessment.
Capital Gains Tax Opportunities
If you have made gains on certain types of investment you may be able to use your annual capital gains tax allowance. This will enable you to make gains up to this amount without incurring a liability to tax. In some examples it is also possible to carry forward past 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 higher rate taxpayer it is worth looking to see who owns the investments and perhaps look to transfer assets into the
BR taxpayers name.Making gifts is also a means of keeping down your liability to income tax.
Inheritance tax (IHT) planning
Each individual 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 yr only. If you are able to make gifts out of income without it changing your standard of living you may be able to make gifts over the annual exemption limit.
If you think your estate could be over the Inheritance Tax nil rate band then effective tax planning can be applied to bring down your estates potential inheritance tax liability. This could be a suitably drafted will or instead trust planning.
Consilium Asset Management are Financial Advisors based in Bristol.
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