As we approach end of the current tax year on 5th April it is time to consider whether there are any tax savings to be made. A few suggestions follow:
Transfer Personal Allowance
We have included in a separate article how, under certain circumstances, you can save £212 very simply by transferring unused allowances to your spouse or civil partner.
Keep your Child Benefit
If you or your partner have income slightly above £50,000 and you are receiving child benefit then relevant earnings can be reduced to below the £50,000 threshold at which child benefit is withdrawn by making a contribution into a pension scheme.
Safeguard your Personal Allowance
Similarly, personal allowances are reduced by £1 for every £2 by which total income exceeds £100,000 resulting in an effective tax rate of 60%. Again, relevant earnings can be reduced by making a contribution into a pension scheme.
Reduce your Marginal Tax Rate
Consideration should also be made to transferring income from a higher earning spouse or partner to a lower or non earning spouse or partner if one partner pays tax at a higher rate than the other. There are a number of possible ways of doing this, such as transferring assets so that any income from those assets belong to the lower earning partner, bringing that partner into a business partnership, or paying them a salary if you are self-employed, although it must always be borne in mind that salaries must be commercially justifiable.
Make Maximum Use of the Beneficial Treatment of Dividends
If you operate a business through a limited company and reward yourself be means of dividends then you should consider maximising dividends in the current tax year to avoid the increase in tax payable from April.
Maximise Your Relief for Replacements in Furnished Lettings
If you receive rents from furnished properties and claim the wear and tear allowance against that income then you should consider delaying the replacement of any furnishings until after the end of the tax year when the 10% Wear & Tear Allowance is abolished
Maximise your ISA Investments
If you have substantial savings income then you should ensure that you make full use of your annual ISA allowance. Individuals can invest up to £15,240 in an ISA before the end of the tax year. Additionally, parents can invest up to £4,080 into a junior ISA for each of their children. All Income & Capital Gains made within an ISA are tax-free.