28/02/2017 by Pete Bird
Newsletter March 2017
Tax Tips - Matters to Consider before 5 April 2017
Owner Managed Limited Companies:
The taxation of dividend income changed significantly in April 2016, so it might be tax efficient, if there is sufficient retained profits in your company, to vote a minimum dividend to shareholders of £5,000. The first £5,000 dividend paid per tax year is tax free and the remainder over this amount is taxed at 7.50% providing you are a basic rate tax payer. Also you may consider gifting shares to your spouse to take advantage of the first £5,000 of dividend income that is tax free.
Use your ISA allowance:
ISA’s provide a tax free environment for your savings. Have you paid the maximum into your ISA investment during the 2016/2017 tax year of £15,240 per person – if not consider topping this amount up. In addition, parents can now also fund a junior ISA. Any unused investment limit cannot be rolled forward into next year, so it will be lost.
Capital Gains Tax (CGT) allowance – use it or lose it:
Every individual is entitled to an annual exemption each tax year, that means gains up to £11,100 for 2016/2017 is tax free. If you do not use this allowance, you will lose it. Therefore if you have assets you are planning to dispose of that attract CGT you should consider whether you are able to dispose part of these in this tax year and part after 5 April 2017 to reduce any tax payable. Remember CGT rate is 10% on all gains apart from residential property where the rates are 18% for basic rate tax payers and 28% for higher rate tax payers.
Maximise your pension contributions:
Contributions to your personal pension attract income tax relief. The maximum contribution that may be made for 2016/2017 without incurring an income tax charge is £40,000. You may be able to make additional contributions if you have not used your allowances for the previous three tax years. Contributions must be made before 5 April 2017 if tax relief is to be claimed in 2016/2017. Your pension advisor or an IFA will be able to assist you in this matter.
Consider making charitable Gift Aid donations before the end of the tax year so as to be able to benefit from higher rate income tax relief for the year as well as helping charities.
Use your personal allowance:
Ensure that you are making the most of your tax-free personal allowance (PA), which is set at £11,000 for 2016/17. If your spouse or partner has little or no income, you may wish to consider transferring income (or income-producing assets) to them to make sure that they fully utilise their PA. However, you should take care to avoid falling foul of the settlements legislation governing ‘income shifting’, and consider the legal consequences of transfers.
Certain married couples and civil partners may also be able to make use of the Marriage Allowance. This allows couples to transfer 10% of their PA to their spouse or civil partner, where neither pays tax at the higher or additional rate.
The above is only a few matters you should consider, but there may be other opportunities depending upon your circumstances. More details are on our website, but professional advice on any matters should be taken as soon as possible, or talk to us.