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Ready for the end of the tax year?

By 14th February 2020 No Comments

The tax year will end on April 5th. Are you confident that you have the made appropriate preparations to maximise your tax allowances?

In our last article, Key steps to maximise your allowances before the end of the tax year, we covered the current ISA allowance, topping up your pension contributions, Inheritance Tax, Capital Gains Tax, boosting your children’s savings and your dividend allowance. If you are yet to take action on these or have any queries, please get in touch. 

In this next article, we take a look at some more allowances, which you should consider:-

The Marriage Allowance

You are allowed to transfer £1,250 of your Personal Allowance to your spouse or civil partner, if they earn more than you and pay tax at the basic rate. This could yield a potential tax saving of £250. You need to make sure that you have income within your Personal Allowance of £12,500. An application to HMRC needs to be made for this allowance. It is also worth noting that you can backdate your claim to include any tax year since April 5th 2015. 

Enterprise Investment Scheme, SEIS and VCT

Investments made with the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) during the current tax year are able to be carried back for relief for the 2018/2019 tax year, potentially providing both income tax relief and capital gains tax deferral relief. However rules differ between the two, so make sure to check with each provider. 

For the EIS, are able to obtain 30% income tax relief on the amount allocated for shares in EIS qualifying companies, from a minimum of £500 up to a maximum of £2,000,000. For Venture Capital Trusts (VCT), you receive 30% of tax relief on investments up to £200,000. For SEIS qualifying companies, you are able to receive 50% income tax relief of up to £100,000 per year.  

The Tapered Annual Allowance

For higher income earners, the tapered annual allowance will apply. For every £2 of adjusted income, including employer pension contributions, as well as income over £150,000, your annual allowance is reduced by £1. The Government has a comprehensive guide for working out whether your income will have the allowance applied. You may only be able to assess this accurately, as you get closer to April 5th. If you assess the figures accurately in time to make a pension contribution, then make sure to do so. If not, as soon as the most accurate figures become available, you can take steps to make up any shortfall by carrying it forward to the next year.

The Money Purchase Annual Allowance

You receive tax relief on pension contributions of up to £40,000 per year or 100% of your taxable salary. However, if you have already started drawing income from a defined contribution pension scheme, the amount you are allowed to pay into a pension scheme, without suffering a tax charge, reduces. 

The allowance for the 2019/2020 tax year remains unchanged from last year, at £4,000 and applies, if you have taken any taxed income from a money purchase or defined contribution pension. This extends to personal pensions, SIPPs and workplace pensions.

If you are unsure, please contact us. 

Expenses

If you are an employee, you may be able to claim for expenses not reimbursed by your employer, such as travel mileage, not including home to work and the cost of buying small essential items or equipment needed to do your job, such as tools or professional subscriptions. 

If your employer reimburses you at a rate lower than the current standard mileage rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter, you are able to claim the difference back in your tax return. 

Taking the time now to make sure you are maximising your allowances could yield notable tax savings at the end of the tax year on April 5th. If you require any help with your tax planning, do not hesitate to contact us.