With the end of the tax year on us, we’ve rounded up the 4 basic considerations for alleviating your tax burden.
Review your portfolio as soon as possible and ensure that you have used your full ISA allowance of £10,680. Married or civil partner couples can also maximise the use of personal allowances, for instance by shifting income-generating assets (provided the transfer is outright and unconditional) or by employing a family member (as long as the salary is commensurate with the job). From November 2011, the new Junior ISA (JISA) is also available for individuals under 18 – £3,600 can be invested. Why not start planning now for the 2012/2013 Tax Season’s ISA of £11,280 per person?
Capital Gains Tax
The CGT allowance of £10,600 will be lost after the 5th of April. It might be a good idea to rebalance your portfolios outside of ISA’s in order to lock in this gain and rebalance the cost of assets. If you are considering disposing of assets that are standing at a gain, make sure you utilise your £10,600 Capital Gains Exemption. If you have investments standing at a loss, you may be able to set the losses against gains on other assets, as long as you are careful not to lose the benefit of the exempt amount.
Pension contributions are relievable at your marginal rate, and so could result in a tax saving of up to 50%. If you earn between £100,000 & £114,950, you may use your annual allowance and make additional contributions into a pension, essentially achieving a 60% income tax relief. Important to note is that unused amounts of the limit may be carried forward for three years only, so the £50k allowance and the carry back allowance to 08/09 tax year is about to be lost. If not yet used, this should be considered, provided you have had a valid pension in place for those years.
You may use the £3,000 gift allowance and £3,000 for the previous tax year if not yet used. The small gift allowance of £250 can also be considered.