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We all have to pay tax but there are ways to legitimately reduce your tax bill by making the most of available tax reliefs and allowances. Download our 50 Tax Planning Tips for 2017/18 guide, which we hope you will find useful.
The main top tax savings tips include:
Remember to use your tax free exemptions wherever possible. This includes a tax free personal tax allowance of £11,500 (reduced by £1 for every £2 for those with income over £100k), a capital gains tax exemption of £11,300, and an inheritance tax exemption of £3,000.
The exemptions can’t be carried forward (with the exception of the inheritance tax allowance which can be carried forward one year only) so make sure you utilise them every year, possibly by advancing/delaying sales into different tax years.
As the income tax personal allowance is reduced where your income is over £100k, consider limiting your income to £100k by giving up part of your salary and asking your employer to make a pension contribution instead.
If one spouse/partner earns more than the other, consider transferring assets to the lower earner to make the most of their lower tax bands.
Also, the above tax exemptions apply to each individual so if assets are held jointly by husband and wife, the first £23,000 of income and £22,600 of capital gains could be tax free every year.
Annual Investment Allowance
Traders, landlords of commercial property or furnished holiday lets and trading companies can all claim capital allowances on qualifying capital expenditure, such as computer equipment, furniture, boilers, lighting etc. The first £200,000 of expenditure qualifies for annual investment allowances, giving 100% tax relief in the year the costs are incurred so businesses should make the most of this.
Remember to make the most of tax free ISA limits of £20,000 per person. You can invest in cash, stocks & shares or a combination of both. Any interest and dividends received on the ISA account is tax free and any capital gains arising from the sale of ISA stocks& shares is also tax exempt.
If you wish to gift money to your kids, you could also consider gifting the funds (up to £4,128 per annum) into a Junior ISA.
Premium Bonds, Child Trust Funds, Children’s Bonus Bonds and other National Savings & Investment products can also be tax efficient.
The first £5,000 of dividends is taxed at 0% (expected to reduce to £2,000 from 6 April 2018). Dividends within an individual’s basic rate band are then taxed at just 7.5% (jumping to 32.5% for higher rate taxpayers). So remember to make full use of both the tax free and basic rate bands.
If you make charitable donations under gift aid or contributions to personal pensions remember to include these in your tax return as they will increase your basic rate band, reducing your tax bill by 20% of the value of the donation/contribution.
Benefits in kind
Tax efficient benefits in kind can also help save tax and national insurance for individuals and employers. These could include:
For further information regarding any of the above or to find out other ways you could save tax please call your usual Springfords adviser or contact firstname.lastname@example.org.
(All rates and allowances above are stated at their 2017/18 amounts, please remember that these are subject to change for other tax years.)