It is always worth checking the basics as it is surprising how often people overlook some savings.
1. The tax free personal allowance of £12,570 can’t be carried forward, so if you are a director of a limited company ensure you have received a salary. If you have no other earnings, you could set this salary at a level that would be tax/NIC free and counts towards your state pension. It is also a tax deductible expense for the company. If your company does not have a payroll or PAYE scheme set up, please contact us for assistance.
2. An individual can transfer up to 10% of their unused personal allowance to their spouse or civil partner provided they are a basic rate taxpayer. The claim can be made on the transferors Tax Return. An election for the Marriage Allowance can be made up to four years after the end of the relevant tax year.
3. Will you utilise your £2,000 tax free dividend allowance if you have shares? Consider transferring or issuing new shares to a spouse or civil partner – please contact us for assistance.
4. Will you utilise your full ISA and/or LISA allowances totalling £20,000 for the tax year? All income and gains derived from investments within such accounts are tax free. If you are aged 18-39, a Lifetime ISA enables you to save up to £4,000 per tax year and receive a £1,000 government bonus towards your first house or retirement. For children/grandchildren you can invest up to £9,000 tax free in a Junior ISA. Speak to your financial adviser.
5. Consider making personal pension contributions and charitable donations to preserve entitlement to Child Benefit if your total income is between £50,099 and £60,000, or remain eligible for the tax free childcare scheme by keeping your total income below £100,000.
6. Avoid a marginal rate of tax of 60% for total income between £100,000 and £125,000 by making personal pension contributions and donations to charity to keep all or more of your Personal Allowance.
7. Claim expenses paid wholly, exclusively and necessarily in relation to your employment, such as business mileage, use of home office, professional fees, and uniform expenses. You have four years from the end of the tax year to claim overpayment relief.
8. Using rent-a-room relief, you can let a room in your home and receive rental income up to £7,500 tax free per tax year.
9. Consider a salary sacrifice scheme and exchange a portion of your salary for a tax exempt benefit, such as employer pension contributions, the cycle to work scheme or an electric car and save income tax plus employee national insurance at 32% for a basic rate taxpayer and 42% for a higher rate taxpayer.
10. Utilise your annual tax free capital gains tax exemption of £12,300. ‘Use it or lose it’. It can’t be carried forward to future years.
11. Transfer income yielding assets to your spouse/civil partner if they pay tax at a lower rate. Consider changing the income split to your actual share of ownership of an asset. Please contact us for more information.
12. If you have more than one home, determine your main residence and make a Principal Private Residence election. You have two years to make the election from the acquisition of the second property or a change of circumstance,.
13. Check your most recent PAYE code to make sure you are on the correct tax code.
14. Make any SEIS, EIS or VCT investments now if you want to claim the relief sooner.
15. You will receive tax relief on the lower of your earnings or £40,000 when you make a personal pension contribution. Any unused Annual Allowance will be carried forward for three tax years. If your ‘adjusted income’, ie total income plus pension contributions is over £240,000 you will have a reduced annual allowance. The minimum annual allowance for individual’s with ‘adjusted income’ in excess of £312,000 is £4,000. If you are a higher rate taxpayer you should check you have claimed all the additional tax relief. If you have no earnings a net premium of £2,880 can be paid into a stakeholder pension and the pension scheme can reclaim basic rate tax from HMRC. Have you considered opening a SIPP for your spouse, children or grandchildren?
16. Individuals who reach State Pension Age after 6 April 2016 need 35 qualifying years of National Insurance Contributions to receive the full state pension. To receive any UK state retirement pension, you need a minimum of ten complete years. You can request a state pension forecast by following this link https://www.gov.uk/check-state-pension The forecast will indicate any gaps in your NIC record which can be filled by paying voluntary Class 2 or Class 3 NIC. Payment should be made within six years of the end of the relevant tax year. You may also qualify for NI credits if you were claiming state benefits, Child Benefit or were a foster carer. The NI credits are not always applied automatically, so it is worth checking your NIC record by following this link https://www.gov.uk/check-national-insurance-record
17. Ensure your pension funds do not exceed the Lifetime Annual Allowance of £1,073,100. Funds in excess of this limit will suffer penalty tax charges when you take pension benefits. Consider making a pension protection application. Contact your IFA for more information.
18. You can make gifts up to £3,000 each year exempt from inheritance tax (IHT). The allowance can be carried forward for one tax year. Consider regular gifts out of surplus income. These are IHT free and reduce the size of your estate for IHT purposes. Please contact us for more information.
19. The residence nil rate band of £175,000 per person applies to a ‘family home’ transferred to children or other lineal descendants. Ensure you review your Will.
20. If you haven’t made Lasting Powers of Attorney (LPA) – do it now. An LPA is a legal document that lets you appoint one or more people to help you make decisions or to make decisions on your behalf. This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions. Please contact us for more information.
21. If you cannot pay your tax liability you should set up a payment plan with HMRC to avoid 5% surcharges and interest being imposed.