Planning for the Tax Year End?
The tax year end is rapidly approaching and you don’t have long to use up various allowances that expire on 5th April 2015, so it really is time to take action now should you wish to do so. Despite the media and politicians doing their best to confuse everyone about tax, tax avoidance is actually perfectly legal and something that is encouraged. By way of example….
- NS&I Premium Bonds & Children’s Bonds
- ISAs – Annual Allowance
- Pensions – Annual Allowance, Lifetime Allowance, Carry Forward Allowance
- Capital Gains Tax Allowance
- Personal Allowance
- Nil Rate Band Allowance (inheritance tax planning)
- Giving Allowance (£3,000 per person)
- Enterprise Investment Schemes, Venture Capital Trusts, Small Enterprise Investment Schemes
- Business Property Relief
There are lots of ways to reduce tax, married couples have even more options. Tax evasion is illegal not tax avoidance. It is certainly true that some schemes are deliberately aimed to test the law on this, but nothing that any of our clients use or would even want to use. Hopefully by now you will have received the lates copy of Talking Money, let me know if you haven’t – we have run out of stock, but you can see an online copy here.
The 2012/13 tax year is nearly at an end. Time is running out. HMRC essentially operate a world of “use it or lose it”. For most people this means ensuring that you have maximised your pension allowances (£50,000 is the maximum permitted in the tax year, subject to a plethora of qualifying rules – aren’t we all thankful for pension “simplification”). These days pretty much the only advantage of a “pension” is the tax relief – which is applied at your highest rate of tax. Thereafter, have you used your ISA allowance, all £11,280 of it? capital gains tax allowances? and a heap of others for those with more sophisticated planning.
Most people give money to charity, so do remember that this attracts tax relief in a similar way to pensions. Also you are able to use your annual giving allowance of £3,000 per person (the giver) moving money from within your estate to those that you want to benefit, a very basic form of inheritance tax planning – it can certainly become much more complex based upon the size of the IHT problem that you expect.
There are other forms of allowances, but please treat these with caution and remember the adage “fools rush in where angels fear to tread”. I was on the train on Saturday evening, coming back from a very good performance of “The Judas Kiss” when the couple next to me started discussing their financial planning rather loudly ( I really wasn’t trying to listen). The subject of their conversations was about VCTs (Venture Capital Trusts) and the tax relief available. They had clearly not attended the same meeting as one was describing how the VCT worked to the other. Their “adviser” had not charged for his “advice” (not permitted nowadays) and I was rather concerned about their understanding of the risk involved and the lack of compensation coverage if or when things go wrong. The FSA would suggest that only around 3% of all investors are likely to find this sort of investment suitable (3% of investors, not 3% of the population). Of course some VCTs can be a great solution, others require you to be more of an expert than a Dragon in the Den. Please be aware that there will always be someone willing to discuss a “guaranteed winner” to an unsuspecting person. When it comes to investing, there is no such thing as a guarantee, despite what it may say on the tin. Be warned – and sadly I have to say that the information on the MAS website fails to adequately convey the degree of risk with a VCT. You can lose all of your money. It is not called venture capital for nothing!
We will be closed for Easter (Good Friday is this Friday!). We re-open on Tuesday 2nd April and I can assure you that despite every good effort, attempting to make a tax-year end payment by Friday 5th April will create some significant stress if you leave it late.