Pre Tax Year End Bulletin 2012
13 March 2012
"There is no such thing as a good tax ......" Winston Churchill, 1924
".....but we can help to make it better" Springfords, 2012
I’m sure we all agree with Mr Churchill, at least when it comes to our own tax liabilities. Unfortunately, tax isn’t optional, but Springfords can help you organise your tax affairs to ensure that you pay the minimum (legal!) amount.
We help many of our clients in this way, and we’re always keen to hear about your plans, both current and for the years ahead, so we can give you the most appropriate and beneficial tax advice. You may not have a specific issue at the moment, but a review prior to the end of the tax year could assist in planning for the future, and perhaps even identify some savings you can make now.
Here are some of the personal tax issues we’d like to help you with before 5 April 2012:
- Capital gains tax – the annual CGT exemption allows you to take gains of up to £10,600 tax free (£5,300 for trusts), and we can help you plan to make best use of this, as well as looking at how you might mitigate liabilities on gains in excess of the limit.
- Pension contributions – we can advise on how to maximise higher rate tax relief, as well as how you can make best use of the opportunity to carry forward relief from earlier years. Act before 5th April 2012 to use relief stretching back to 6 April 2008!
- Tax efficient investments – consider using your annual ISA allowance of £10,680 prior to 5 April, to secure tax free income and growth. (We can’t advise on ISAs, but we can put you in touch with those who can!)
- Corporate investments – Enterprise Investment Scheme and Venture Capital Trust subscriptions can attract 30% income tax relief as well as generous capital gains tax savings. Investments prior to 5 April will reduce this year’s tax liability, and you may even want to carry back some relief to the previous year to generate a tax repayment. The rules are labyrinthine, but we can guide you through.
- Charitable donations – higher rate tax relief can be obtained on Gift Aid donations, offering a philanthropic way to reduce your tax costs! Gifts of certain assets to a charity outwith the Gift Aid scheme can also attract tax relief up to 50%, and we can help you decide which approach is better.
- Allowances and lower rate bands – where possible, you should ensure these are fully used by 5 April. Talk to us about how you might achieve this – if you have your own company or business, for instance, we can consider alternative methods of extracting income prior to the end of the year.
- 60% tax rate! – if your income exceeds £100,000 you will lose personal allowances, and any income between £100,000 and £114,950 will attract an effective tax rate of 60%! We can advise on what action can be taken by 5 April to help preserve your personal allowances.
In the longer term, we could also assist you with:
- Inheritance tax (IHT) planning – we can review your financial affairs to make sure they’re organised effectively to minimise your exposure to IHT; this could include ensuring that you use your annual gift exemptions of £3,000, along with other exemptions including that applicable to gifts out of excess income.
- Wills – it’s important to revisit these regularly, and we’d like to ensure they remain tax effective, especially if there have been any changes to your personal circumstances – it’s also a good point to consider IHT tax planning.
For those in business, there are additional ways we can help, on an ongoing basis:
- Accounting date – altering the year end date for self employed businesses can result in substantial savings. We can show how this could benefit you, reducing tax liabilities and improving cash flow.
- Capital allowances – we can give you advice on the timing of purchases to secure higher levels of Annual Investment Allowance relief, which reduces from a maximum of £100,000 down to £25,000 after 5 April.
- Losses – losses can maximise tax refunds and impact on future tax liabilities, and we can explain the various options available to you and the best route to adopt in your circumstances.
- Income extraction – views regularly alter on this one, but we can give you a summary of the various methods available and advise you of any current issues that you need to be aware of when deciding how to take income from your company so that action can be taken prior to 5 April if necessary.
- Selling your business – if you’re considering selling your business or retiring, we can assist with the tax planning at an early stage, to ensure tax savings are maximised.
These are just some ideas, but we have many more! With the 2012 Budget just round the corner on 21 March, this might be the right time to speak to us. Find out how we can help you with these or any other tax, accountancy or business issues, by getting in touch with your usual Springfords contact on 0131 440 5000.