Matt Herd, of Duncan and Topliss takes a look at the tax deadline.
As we fast approach the tax year end deadline of April 5, it is always worth reviewing your tax situation.
The basic income tax personal allowance for 2014/15 is £10,000. There is a higher allowance of £10,500 for those aged over 65 although this allowance starts to be lost once income exceeds £100,000.
The basic rate of tax (20 per cent) is paid on taxable income of up to £31,865 and once again it is advisable to review your income to ensure this band is utilised and that higher rate tax liabilities are minimised.
Once taxable income exceeds £31,865 tax is paid at 40 per cent or even 45 per cent for the highest earners.
Making pension contributions or gifts to charity will reduce higher rate tax liabilities.
The annual limit for pension contribution relief is currently £40,000, although you can top up your allowance for the current year with any allowance you didn’t use from the previous three tax years.
For a family business, consider paying a salary to all members of the family involved to utilise their personal allowance, or basic rate band.
Married couples or civil partners with significantly different levels of income should consider reorganising the ownership of income-producing assets to lower their overall tax liability.
If an asset is owned jointly by such couples, HM Revenue & Customs will automatically assume each receives 50 per cent of the income.
For assets owned in unequal shares an election can be made to HMRC for the income to be taxed in accordance with the underlying ownership.
Transfers of assets between married couples or civil partners are on a no gain, no loss basis and will not attract a Capital Gains Tax (CGT) charge.
This can be useful to maximise the use of annual exemptions or lower CGT rates.
Implications for other taxes or reliefs, including Stamp Duty, Land Tax or Entrepreneurs’ Relief, should be considered.
For people in receipt of Child Benefit, the High Income Child Benefit Charge will apply if either they or their live-in partner has an individual income in excess of £50,000 – in which case, consider taking measures to reduce taxable income or electing not to receive Child Benefit.
Everyone should review whether there are any tax refunds to claim, including on behalf of children, for example in respect of any tax deducted at source from bank interest, or trust distributions, or where expenses claims can be made in respect of certain employment-related expenses. There are deadlines for making these claims. For the year ended April 5 2011 the claim needs to be submitted by April 5, 2015.
ISA contributions may need to be maximised prior to April 5, but individuals should consider their investment strategy in full and not simply based on tax-efficient savings.
While the above suggestions may assist in reducing tax liabilities, taxpayers should always take professional advice in order to ensure that there are no unforeseen consequences of their actions.
For more information contact Duncan & Toplis on 01205 310250.