Personal tax planning – five tips for minimising your tax liabilities
Article posted: 20th March 2018
Is it too late for me to take steps to minimise my tax liabilities before 5 April?
There are fewer reliefs available these days to mitigate your personal tax liabilities, but there is still action you can take before 5 April which will help.
Here are our five top tips:
1. Pension planning
By far the easiest and most effective, make sure you maximise your pension contributions in 2017/18. Don’t forget you can utilise unused annual allowances from the previous three years, but if your annual income exceeds £110,000 you may be subject to the Tapered Annual Allowance, reducing your annual allowance below the £40,000 maximum.
2. Use your dividend allowance
When the taxation regime for dividends changed on 6 April 2016, a £5,000 annual dividend allowance was introduced to permit the first £5k of dividend income to be taxed at 0%. It is worthwhile making use of this allowance, which is available to all taxpayers regardless of their total income. From 6 April 2018 the dividend allowance will be reduced to £2,000.
3. Use them or lose them
Some tax allowances are lost forever if not used. Make sure you don’t miss out on the following:
- ISAs contributions (£20,000 for 2017/18)
- Pension contributions (see 1. above)
- Personal allowance and basic tax rate bands (£11,500 + £33,500 for 2017/18)
- Capital gains tax annual exemption (£11,300 for 2017/18)
- IHT gift thresholds
4. Claim those business expenses
They may be ‘out of pocket’ but they can soon add up and save you tax. Don’t forget to claim:
- Travel, parking and taxis
- Business use of own car (45p/25p per mile)
- Entertaining, subsistence and staff welfare
5. Shift income to your spouse
It may be late in the day for 2017/18 but it could have an ongoing benefit. So often we see higher earning individuals in receipt of income from bank accounts held jointly with their lower earning spouses.
Shifting income between spouses from higher to lower earners in respect of interest, dividends, rental and other income is easy and can save you a small fortune in tax. Don’t delay!
These tax planning tips are based on McBrides understanding of current law and HM Revenue and Customs practice. You should always speak to appropriate advisers for help with your personal tax and pension planning and no responsibility for loss by any person acting or refraining from action as a result of the material in this article can be accepted.
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