Pre tax year end planning 2015-16

Income tax

  • Review income producing asset ownership between you and your spouse in order to maximise personal allowances and basic rate bands.
  • Consider pension contributions or gift aid donations to either mitigate the withdrawal of child benefit where your income exceeds £50,000, or mitigate the withdrawal of personal allowance where your income exceeds £100,000, or mitigate additional rate tax at 45% where your income exceeds £150,000.
  • Pension contributions will also provide tax relief at your marginal rate of income tax. Careful planning will be required in order to ensure current annual allowance limits are not breached whereby unforeseen tax charges would arise.
  • Gift aid donations also qualify for higher rate tax relief and the charity can also claim the basic rate element.
  • Gifts of quoted shares and land to charities qualify for full relief against income and are exempt from capital gains tax.

Stamp duty land tax

  • Purchases of second homes/holiday homes and additional buy to let properties should be completed by 31st March 2016 in order to avoid an additional 3% stamp duty land tax levy.

Investments

  • Individual’s aged 18 and over can invest up to £15,240 each and parents can fund a junior ISA or child trust fund with up to £4,080 per child – making a total of £38,640 for a family of four before 6 April 2016.
  • Help to buy ISA’s are also available where the government adds 25% tax free to the ISA balance when it is used for a deposit. The maximum bonus is £3,000.
  • Investments in EIS shares gives you income tax relief at 30% on investments up to £1 million. After three years any capital gain made on sale is exempt and inheritance tax free after two years. Capital gains can also be deferred on your investment.
  • Investments in SEIS shares gives you income tax relief at 50% on investments up to £100,000. Capital gains advantages can also arise.
  • Income tax relief at 30% is available on qualifying VCT investments up to £200,000. Dividends received on units are tax free and after five years gains on sales of units are also tax free.

Capital gains tax

  • Make use of your capital gains tax annual exempt amount which is £11,100 for the year.
  • Consider the timing of capital gains if your income fluctuates between tax years as gains are taxed at your marginal rate at either 18%, 28%, or both.
  • Consider the use of a main residence election if you have purchased a second home over the last two years and use this as a residence alongside your usual home.
  • Consider claiming capital losses for assets which have become worthless within the last four years. Once claimed the losses can be used to offset current or future gains.
  • Check whether you meet the conditions to qualify for entrepreneurs relief on business assets (such as shares in your unquoted company) or if they don’t explore opportunities to make them qualify. Gains on sales of business qualifying assets attract a tax rate of 10% as opposed to 18% or 28%.

Inheritance tax

  • Review your current will to ensure that it stills meet your requirements.
  • Make sure you utilise available exemptions such as the annual £3,000 per donor per tax year, £250 for small gifts, and gifting away surplus income on a regular basis which qualifies as inheritance tax free.
  • Invest in inheritance tax efficient assets such as business and agricultural assets.
  • Plan ahead for the new residence nil rate band which is being introduced from 6th April 2017.