Tax Planning 2018 – Updated
Now we are into the 2018/2019 tax year and on reflection of the 2017/2018 tax year and the inevitable mad dash to make the most of tax allowances, I thought it would be a good idea to share an article on tax planning and how you can make the most of the allowances available to you.
Capital Gains Tax
Capital Gains Tax is a tax applied to the profit made when you sell an item e.g. your rental property, an antique, shares etc. Each year every taxpayer will have a Capital Gains Tax allowance and if the profit in a given tax year falls below that value your gain will be tax-free. The tax-free allowance for 2018/2019 financial year is £11,700 per person.
Below are some simple measures you can take to minimise your Capital Gains Tax liability;
Transferring assets into joint names (spouses or civil partners) allows you to both make use of the tax-free allowance providing the transfer is a genuine gift.
Look for tax-efficient investments such as works of art or antiques.
If you have a save as you earn share option scheme you can transfer your shares to an ISA or pension within 90 days tax-free. Gains when you eventually sell will be tax-free too.
Saving for retirement should be built into your year-end tax planning as the tax relief on contributions quickly adds up. Tax relief on contributions at your marginal rate of tax along with tax-free growth and the provision to take a tax-free lump sum on retirement, make pensions an ideal vehicle for saving for later life.
Look at making additional contributions to your pension before the end of the tax year, taking care not to go over your annual or lifetime allowance.
Check whether you have any allowance remaining from the 2015-16 tax year. This will expire on 5 April 2019.
If your spouse or child has no earnings you can contribute to their pension scheme and claim basic tax relief on these contributions.
Tax-Free Savings – ISA
ISAs are available to all residents over 18 and are a great way to invest up to £20,000 each year. Any income or gain within the ISA is exempt from income tax and capital gains tax, making it an attractive investment.
Check whether you have used all your allowance as any allowance not utilised is lost.
You can invest up to £4,260 into a Junior ISA on behalf of a child.
Introduced in 2017, the Lifetime ISA is for those aged 18-40 and enables you to save up to £4,000 a year tax-free and you will receive a bonus of 25% from the government. These accounts are specific to first home purchases or retirement planning and so penalties will be applied if monies are withdrawn outside of the restrictions placed on the accounts.
Inheritance Tax Planning
As property prices increase, Inheritance Tax is something that many of us need to consider to ensure our loved ones are looked after. There are exemptions you can make use of now to minimise the Inheritance Tax liability by gifting assets.
You can gift money or possessions to your spouse or civil partner without limit, providing they permanently reside in the UK.
You can gift up to £3,000 of money or assets per year under the annual gifts exemption.
Other gifts may include normal gifts from income such as birthday or Christmas presents, the small gifts allowance of up to £250 per person and gifts to charities.
The rules and allowances do vary and we would advise you seek professional guidance to ensure that your Inheritance Tax Planning will yield the results you desire.
Introducing Stefanie Price Wealth Management.
There are times when, as your accountants, we will take a step back and advise you to seek the services of a financial advisor in order get you the best advice on maximising your money.
Stefanie Price Wealth Planning is committed to providing financial advice that ensures a secure financial future, whether for yourself or for your family. We take the time to understand your current position, you and your family’s priorities and motivations in order to build an attainable, financially secure future.
Stefanie Price Wealth Planning can offer advice in the following key areas: