The end of the 2017/18 tax year is set for Thursday, the 5th of April – and there’s never been a better opportunity to review matters in order to ensure that your finances are working for you – and not the other way around. Having your affairs in order and up-to-date provides a unique window to get things done, and make changes which can positively influence your businesses’ prospects for this year and for the future.
We’ve prepared a short guide packed full of short, savvy solutions which we hope will give you food for thought on how to reduce your tax liability.
Whether you’re an existing client piqued by the thought of any of the ideas this list provides, or are looking to introduce a fresh way of thinking to your business or individual affairs, we’d love to hear from you. Contact our St Asaph offices today in order to arrange a face-to-face meeting.
Personal Solutions to Lessen the Load
- Strategic Giving Can Save You Money – For those on the lower end of a high tax bracket, strategic giving can enable you to obtain a little bit of breathing room. For instance, should your income exceed £150,000 it is taxed at a higher rate of 45%. Strategic giving such as pension contributions or charitable donations can allow you to sacrifice a small amount of your earnings in order to do better overall – as well as put money toward things which matter such as the future of your staff or causes which are important to you.
- Gift Aid Alternatives – Charitable donations may make you feel somewhat wary, given the fact that Gift Aid may give you an unexpected Capital Gains Tax liability. A practical alternative is gifting stock market listed shares to a charity, essentially as a gift to keep on giving.
- Invest, Invest, Invest – Should you own your own business, certain investments can make your income reduce to the extent that the higher rates of income tax may not apply to your final sum. Our team of accountants can ensure that with the correct planning and the correct investment, your money can work for you – not for the taxman.
Business Owner? Here’s Some Solutions Worth Considering
- Expend Your Revenues – There are no rules against expending your revenue to include a salary payment to your spouse. Of course, you do have to ensure that it is justifiable. An excellent way to do this is to set up an approved pension for your spouse, in order to provide further deductions as needed.
- Don’t be Afraid to Upgrade – Making do with what you have is all well and good, but a surprising amount of business owners are not aware that capital expenditure on plant machinery (up to £200,000) can be relieved thanks to Annual Investment Allowances. We are pleased to advise how this can change things for your business, specifically.
- Adapt Early – While indeed quite a few business owners are looking at MTD in a very wary fashion, it is worth remembering that this system is here to improve things. Better record keeping has been shown to boost productivity, and we can help you ensure that the process is a smooth one. We’re more than prepared for MTD, and we can provide practical advice and assistance with Digital Record Keeping should you need it.
Are You An Employee? You Can Make Changes Too
- Make Sure You Understand Your Pension – Savers paying into a pension expect tax relief, but since 2016, tax relief is reduced by £1 for every £2 which forms the annual income when it exceeds £150,000. Carry-forward of annual allowance of course is still allowed, but this only makes it more important to correctly calculate your income as far forward as possible.
- Employee Shares are the way Forward – Employee Share schemes offer significant tax advantages, and are essentially the right to buy a certain number of shares at a fixed price. More than 1300 companies across the UK offer this sort of scheme, and it is estimated that 2 million employees across the UK are taking advantage of these plans.
- Think Twice About Fuel Reimbursements – Should you be in a job where fuel is provided by your employer, it may be more worthwhile to actually reimburse your employer rather than pay fuel scale charges. Of course, your particular situation will be the deciding factor in this, and the advice of your accountant is imperative.
Families, Companies, and Family Companies
- ISAs Are Back – ISAs are considered an excellent way to save for both the future, and right now. Every one of your children, providing they are under the age of 18, are entitled to have their own Junior ISA, meaning that up to £4,128 per year can be deposited in a completely tax-free manner. Alternatively, should your children be 16 or over, funds can be gifted to them in order to obtain both assistance for your child’s future, as well as up to £200 tax-free investment per month. Lifetime ISAs are also an option should your children be aged from 18 to 39.
- Kids Can Be Stakeholders Too – Stakeholder pensions are a long-honoured way of providing for your children, as well as allowing up to £2880 of tax-free investment. Your children do not have to have any earnings in order to benefit from this, so it stands to sense to take advantage of it.
- Dividends Are Changing – An important change is coming to dividends and the way that they are calculated. The current allowance of £5000 is due to fall to £2000 from the 6th of April, and it may be a wise choice to consider whether your circumstances will allow you to stagger your salary, bonus and dividends in order to lessen the blow. Make an appointment to speak to us – we’ll be able to give you all the advice you’ll need.
Make Your Property Work for You
- Are you a landlord? There are a number of ways of which you can make your property take a little of the burden of balancing your affairs. For instance, you can consider advancing replacements of varying furnishings before the 6th of April 2018 in order to claim the relief sooner. And you’ll probably have very happy tenants, too!
- Review Your Second Home – Should you have two properties, you can save on Capital Gains Tax by nominating it against your main residence. Depending on your circumstances, you should then be able to claim against the CGT which arises on the sale of the property with the largest gain.
- Stamp Duty in 2018 – Stamp duty is more or less the same as when it was changed in 2016, with an additional 3% applicable per purchase of additional residential property above the sum of £40,000. In order to make savings elsewhere to accommodate for this, we recommend that you contact us to arrange an appointment. We’re here to help, after all!
A Yearly Look at Your Pension
- Use Your Pension Relief Now – Should you have the available funds, it is highly recommended to make a contribution of up to £40,000 before April the 6th. This is intended to soak up any and all unused pension relief from 2017. Of major note is the fact that if you don’t have the funds in order to be able to do this right now, your unused relief will roll over… for a maximum of three years.
- Let’s Have A Chat – It is generally considered fool’s advice to advise in a broad sense about pensions. Pensions are something which is almost entirely unique in every single case, and to give full and comprehensive advice for each individual and their pension is best in a bespoke manner.
Please keep in mind that this list is not exhaustive, and is provided in a general sense. There may be other methods which are suited to you and your circumstances, and should not be attempted without the advice of an accountant. Contact Us in order to discuss your pension and other matters at our St Asaph Offices.