Reduce your Tax Bill: Planning for the End of the Tax Year

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Kieron Brace

Investment Manager

01536 462700

kieron.brace@msfs.co.uk

30 January 2012

As we approach the end of another tax year it is now as important as ever that financial objectives are reviewed and tax planning opportunities are maximised.

Whilst the usual rush to complete this exercise starts mid to late March, starting the process now will give you time to complete a full review with your IFA and will ensure that you do not miss the opportunity to make full use of your allowances.

The following is a brief guide to some of the opportunities to be considered.

Pensions With 2011’s significant change to Annual and Lifetime allowances it is important to consider making full use of this year’s contribution allowance, £50,000, as well as carry forward any unused allowance from 08/09 tax year. Pension contributions earn tax relief at your highest marginal rate, potentially 40 or 50% relief on the contributions so this is a very effective form of tax planning (it is important that tax returns are completed to claim this relief). In addition pension contributions should be considered when offsetting any chargeable gains from the surrender of any investment bonds (see later). Salary Sacrifice is another tax efficient way of investing into a pension as less tax and National Insurance will be paid on the reduced salary. Employer National Insurance savings may also be added to the pension contribution but often the decision to move into salary sacrifice will need to be made for the start of the tax year. Visit our Pensions page		Edited CC image courtesy of 401K / Flickr
CC image courtesy of J D Mack / Flickr		Individual Savings Accounts (ISAs) The current annual Individual Savings Account (ISA) allowance is £10,680 and this will rise to £11,280 in the 2012/13 tax year. Since the ISA was launched in 1999 individuals could have contributed more than £100,000 into this tax efficient savings wrapper (ignoring contributions into their predecessor the PEP). For most individuals ISA’s will be the most tax efficient form of investing, after pensions, and will allow you to build up a significant lump sum to fund retirement or lump sum expenditure in the future. One of the significant benefits of ISAs is the access to capital or income at a time to suit the investor. Visit our ISAs page
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) VCT’s and EIS’s offer significant tax advantages to those willing to invest for a minimum of 3 years and offer 30% income tax relief available on both types of investment as well as Capital Gains Tax and Inheritance Tax benefits on EIS’s. With the opportunity to carry the tax relief back to the previous tax year these investments offer an alternative to pensions and are another way to reduce your overall tax liability. Visit our VCTs page		CC image courtesy of Charles Cook / Flickr
Other Considerations The end of the tax year is also a good time to look at existing Investments bonds. Surrenders could be managed to ensure that gains are spread over two tax years and pension contributions could be used to offset any higher rate tax that may be payable. Existing Unit Trust, Open Ended Investment Company (OEIC) and share portfolios should also be reviewed to ensure that the Capital Gains tax allowance of £10,600 is being used. Capital losses can also be realised and used to offset future gains. In addition to the above opportunities making use of the allowances between couples and considering business structures are also ways to try and improve your overall tax position. As you can see there are plenty of potential ways to try and reduce your tax bill for this year and future years. If you would like to ensure that your tax planning is all in place for the end of the tax year please contact Moore Stephens Financial Services on 01536 462700 to arrange a review meeting.

Tags: Tax Relief, Reduce Tax Bill, Pensions, ISAs, VCTs, EISs, End of Tax Year, Saving

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