End of Year Planning Trumps Brexit
Not to be overshadowed by Brexit, the Spring statement took place on Wednesday 13th March 2019. It contained no tax changes, but echoed calls for tax simplification and offered further incentives for research and development,. We will have to wait for the ‘rabbits to be pulled out of the hat’ in October’s Budget for more information. For a more detailed review of the announcements and corresponding political stance, please read our further Spring Statement 2019 Guide.
In the absence of any major changes, here’s our handy guide to help you structure your finances and tax planning before the end of the current tax year of 5 April 2019.
End of year tax planning
·The tax free personal allowance of £11,850 can’t be carried forward, so if you are a director of a limited company ensure you have received a salary of at least the Class 1 National Insurance lower earnings limit of £6,032. This salary is NIC free and potentially tax-free if planned accordingly, and will count towards the state pension. It is also a deductible expense for the company. If your company does not have a PAYE scheme set up, please contact us for assistance.
Ensure you have utilised your £2,000 tax free dividend allowance if you are a shareholder. You could consider transferring shares to a spouse.
Have you utilised your full ISA &/or LISA allowances totalling £20,000 for the year? No tax is payable on income and gains on investments held within an ISA.
For children/grandchildren you can invest up to £4,260 tax free in a Junior ISA.
Preserve entitlement to Child Benefit if your total income is between £50,099 and £60,000, and avoid a marginal rate of tax of 60% for those with total income in excess of £100,000 by making personal pension contributions, and donations to UK/EU charities.
Capital gains tax
Have you utilised your annual tax free CGT exemption of £11,700? ‘Use it or lose it’. It can’t be carried forward to future years, so utilise now if you are planning on selling assets like shares.
Transfer income yielding assets to your spouse/partner who may pay tax at a lower rate.
For spouses consider changing the income split to your actual share of ownership of an asset. Please contact us for more information.
Determine your main residence If you have more than one home by making a Principal Private Residence election. You have two years to make the election but this is not impacted by the tax year.
From 6 April 2019 the qualifying holding period for Entrepreneurs relief is increasing from 12 to 24 months and non residents will be liable to capital gains tax on the disposal of commercial property.
You can receive tax relief on the lower of your net relevant earnings or £40,000 when you make a personal pension contribution. Unused Annual Allowance can be carried forward to the next three tax years. If you have total income over £150,000 you will however have a lower annual allowance.
If you have no earnings a net premium of £2,880 (£3,600 gross) can still be paid into a personal pension and the pension scheme can reclaim basic rate tax from HMRC. Have you considered opening a SIPP for your children/grandchildren?
Ensure your pension funds do not exceed the Lifetime Annual Allowance, currently £1.03m. 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.
If you die before 75, beneficiaries can access your pension pot free of tax and the transfer will be exempt from IHT.
For company directors/shareholders company pension contributions may be more tax efficient than personal contributions.
You can make gifts up to £3,000 each year free from IHT. The allowance can be carried forward for one tax year.
Also consider regular gifts out of surplus income. These are IHT free and also reduce the size of your estate for IHT purposes. A pattern should be established.
Tax free childcare
Working parents can access tax free childcare. For every 80p deposited, the government will add 20p. The scheme can be used to pay for up to £10,000 of childcare each year. The scheme is designed for children up to the age of 12. To qualify both parents must be in work, and each earn at least £120 a week, but not more than £100,000.
It can’t be used in conjunction with childcare vouchers.
Uptake has been lower than anticipated, according to government data just 91,000 families have enrolled.
Making tax digital (MTD)
HMRC’s flagship project is being rolled out from 1 April 2019. Businesses with annual taxable turnover over the VAT threshold of £85,000 (with some exceptions) will be required to keep electronic records and submit their VAT returns digitally using cloud accounting software. VAT registered businesses must enrol for MTD. This can be done by an agent. Please contact us if you require support with cloud accounting software or help with your online bookkeeping.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.