Words of wisdom on approaching the year end with confidence
We have put together a list of top tips for individuals on how best to prepare for the tax year end on 5th April 2019.
Preparing for the end of the tax year can be a complex and at times stressful business, particularly if you haven't been as organised as you could have been this year. Bearing the following points in mind could help you end the year at a financial advantage and will hopefully set you up for a prosperous new tax year:
First and foremost, make sure you know the net relevant income thresholds. If your income is at or around one of the following thresholds, you should seek advice from your accountant on whether there are any opportunities to reduce your taxable income:
- At £150,000 taxable income, you'll be into the additional rate income tax band and your tax rate will be 45%;
- At £46,351 taxable income, you're into the higher rate band and will be taxed at 40%;
- Starting at £100,000, your Personal Allowance tapers down by £1 for every £2 that your adjusted net income is above this threshold, with no allowance above £123,700.
- At £50,000, the staggered High Income Child Benefit Charge begins and you won't be eligible for any Child Benefit if you earn over £60,000.
Depending on your circumstances, it could be worth considering the following strategies:
Can income-producing assets be transferred? If your spouse or civil partner pays tax at a different rate to you, seek professional advice about whether you can transfer income-producing assets to whoever earns less (though be aware of the 50/50 rule for jointly-owned assets).
Consider your family's earnings as a whole. If you have a family business and there's scope for legitimately employing a relative in the business, this can be an excellent way to ensure every family member makes the most of their allowances and the family's income as a whole is taxed at the lowest rates possible. There are a few traps to watch out for so be sure to seek professional advice.
Take this further with partnership planning. Employing a family member is one thing, but taking a relative into partnership and profit-sharing could mean you'll pay less tax if splitting profits means you both fall into the basic rate band. Again, the partnership must be genuine and not just a tax arrangement.
Remember to Gift Aid your donations. Gift Aid payments are a simple and often overlooked way to reduce your net relevant income, which can benefit you when it comes to HICBC and tax bands. Charities also receive more funds from Gift Aid donations, so everybody wins.
Investigate ISAs. Up to £20,000 can be invested in an adult ISA, from which you can make income tax-free withdrawals. As ISA limits can't be carried forward into the new tax year, now's the time to make the most of the savings limit.
Our Partner Stephen Castleman says: “If you feel you would benefit from assistance or support with adjusting your income or personal tax planning, get in touch with us and we can help you to get your head around your finances and make sure everything's running as efficiently as possible.”
For further information on how we can help you prepare for the end of the tax year, please call our Leicester branch on 0116 254 9262 or our Loughborough branch on 01509 263500.