Here are some ideas for tax year end planning as we approach the end of the tax year.
Year end Pension Planning:
Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years. This is generally the difference between £50,000 and the pension input each year and can be added to your relief for 2013/14. Note that the annual pension allowance reduces to £40,000 from 6 April 2014.
From 6 April 2014, the lifetime pension allowance, which determines the amount you could save into pensions and receive tax relief will be reduced to £1.25 million. Apply for fixed protection before 6 April 2014 to continue to benefit from the current £1.5 million lifetime allowance.
Make charitable payments under Gift Aid to save more tax:
Higher rate taxpayers should make any charitable payments under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC. Note also that Gift Aid can be carried back for relief in the previous tax year.
Avoid losing your personal allowance:
For every £2 that your adjusted net income exceeds £100,000 the £9,440 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.
Year end Capital Gains Tax Planning:
Have you used your 2013/14 annual exemption of £10,900? Consider selling shares where the gain is less than £10,900 before 6 April 2014. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.
Take advantage of your 2013/14 ISA Allowances:
Your maximum annual investment in ISAs for 2013/14 is £11,520 (up to £5,760 of which can be saved in a cash ISA). Your investment needs to be made before 6 April 2014. In addition have you thought about investing for your children or grandchildren by setting up a Junior ISAs or pensions? In the 2013/14 tax year, you can invest £3,720 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.
Other tax efficient investments:
If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS), which offers income tax relief of 30 per cent as well as capital gains tax relief? An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available, together with a capital gains tax exemption on disposal and the ability to shelter 50% of your capital gains in 2013/14. A 30% income tax break is also available by investing in a Venture Capital Trust.
Inheritance tax planning:
Have you made use of your annual inheritance Tax exemptions? The general annual exemption is £3,000 per donor (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.