With the tax year ending soon have you been as tax efficient as you could have been this tax year?
What can you do before the year end to maximise your tax efficiency?
Here are a few of my tips for tax efficiency:
If you have a limited company – make sure you have paid £5,000 in dividends if profits allows. The tax free allowance for dividends is reducing to £2,000 after 6 April 2018
Transfer income-producing assets to a spouse if you pay tax at different rates. If you have a limited company, should your spouse also have shares to get their tax free dividend allowance and potentially pay tax a lower rate on additional dividends?
Check your total income for the year if you receive child benefit payments. If you have the ability to determine your income for the year, by varying the level of dividend paid, keeping your income below £50,000 will ensure you retain your child benefit.
Trivial Benefits – limited company directors can get £300 a year tax free using these. If you have not used your full allowance yet, get down to John Lewis and stock up on vouchers. Conditions do apply so check my early blog for full details
If you are considering buying capital equipment for your business, doing if before the end of the tax year will give you the tax deduction this year rather than next
Pension contributions – very tax efficient for the company to contribute to your personal pension. Review any payments made in the year and take advice from an IFA.
If you have taxable income over £100,000, you will lose your personal allowance on a sliding scale, so your marginal tax rate may be as high as 60% on part of your income. Consider making additional pension contributions or gift aid donations which may restore your personal tax allowance.
Use your allowance for tax free ISA saving; that’s up to £20,000 in this tax year. Under 18s can save £4,128 in a Junior ISA. Also consider LISA’s to help your children get on the housing ladder.
Inheritance tax – often forgotten, but if you have spare cash available, consider making gifts to take the funds outside of your estate. If you don’t have the cash, bring this up with grandparents over Sunday lunch! Up to £3,000 per tax year can be gifted as one off capital sums and will be exempt from inheritance tax. Any unused part of this allowance can be carried forward 1 year.
Often simple steps can be taken to minimise your tax bill, so hopefully the above list has added one or two items to your “to do “list.
Please contact me for any further information.