Have you thought about your new year’s resolutions yet? If not, why not start thinking about minimising your tax liability by making the most of the allowances and exemptions that are available? The end of the tax year will soon arrive, and some allowances are set to change and others lost so now is the time to start planning.
Your personal tax allowance
The 50 per cent additional rate of income tax on incomes above £150,000 will reduce to 45 per cent on 6 April 2013. For those who fall into the higher band, it may be beneficial to defer income from 2012/13 to 2013/14 where possible as this will save five per cent on the top slice of taxable earnings. Elsewhere, those with incomes above £100,000 will suffer a withdrawal of their personal allowance at a rate of £1 for every £2 over this amount.
Child benefit changes
HMRC this month began issuing letters to households that may be affected by changes due to come in on 7 January 2013. Households with income of more than £60,000 are likely to lose all of their child benefit, while households with an income between £50,000 and £60,000 will be subject to a new levied tax charge on their benefit. Furthermore, those who continue to receive the benefit and pay the tax charge will need to do so through self-assessment. We can help file self-assessment forms and may find legitimate ways to avoid losing all of your child benefit.
Tax efficient investments
Personal. Have you made use of your annual ISA allowance? For the 2012/13 tax year, individuals can invest up to £11,280 in total, with a maximum of £5,640 in cash, into an ISA which offers tax relief on the income and gains. Junior ISAs for under 18s are also available.
Business. There are now three tax efficient investment schemes for individuals seeking to invest in UK businesses: the Enterprise Investment Scheme (EIS), the Venture Capital Trust (VCT) and the Seed EIS. As is usually the case, the higher the investment risk the greater the tax advantages to be gained. For example, the EIS offers 30 per cent tax relief on large investments into growing businesses and capital gains exemption on shares after a qualifying period. Alternatively, the VCT offers the same rate of tax relief on smaller investments as they are made through a fund. The new SEIS offers a greater range of benefits providing investment is made into a smaller business at the start of trading.
A vital part of our role is to make sure that you are keeping your tax liability to a minimum. A more detailed guide can be found on our website, but please do not hesitate to contact us if you would like to discuss any areas of end of year tax planning.