tax planning ideas
The ideas below are a sample of our pre year end tax planning ideas. For a full list of our ideas refer to the tax section on our website.
1. If your taxable income is over £150,000 you should plan for the 50% tax rate
Planning could include:
- Accelerating income to the current tax year e.g. bonuses or dividends, to be taxed at the current highest rate of 40%. Be aware that this will accelerate the date tax is payable though.
- Deferring claims for tax reliefs such as capital allowances or income tax losses. This will also accelerate tax payments.
- Equalising income between spouses and civil partners. You should ensure both parties fully utilise their personal allowances and lower rate tax bands where possible.
- Sole traders or partnerships could change their accounting year end to bring forward the taxation of profits, but at a lower tax rate.
- The use of a share incentive scheme such as the Enterprise Management Incentive.
2. If your income is between £100,000 and £113,000 you could reduce income below £100,000
Between the above limits the personal allowance will be restricted. You could make pension contributions or gift aid payments to reduce your income to below £100,000 to retain the full personal allowance, or maybe move some of your income into a new limited company.
3. Review your position with regard to the pension anti-forestalling rules
If you think you may be affected, consider your position to see if you can remove yourself from the anti-forestalling rules.
4. Crystallise capital gains at the 18% capital gains tax rate whilst it still exists
See the article in this newsletter.
5. Bring forward business investments in capital items qualifying for capital allowances
The 40% first year allowances cease on 31 March/5 April therefore if forthcoming expenditure is going to exceed the annual investment allowance of £50,000 it may be worth considering bringing forward the expenditure.
6. Consider transferring a company car to you personally
With the ever increasing tax charges on company cars and fuel benefit it may be worth transferring your company car to you personally. This may cause an increased tax charge in 2009/10 (if it is transferred to you at undervalue) but may be sensible planning overall. We have our own calculation software to help you.
7. If you have a company and it falls within IR35 and has deemed payments, change your year end to 5 April 2010
8. Make the most of the furnished holiday letting rules whilst you can
If you have a furnished holiday home that you let out, either in the UK or EEA, take advantage of the more advantageous furnished holiday letting rules before they cease on 5 April 2010.
9. Make use of your inheritance tax exemptions
Take advantage of the annual gift exemption of £3,000 where possible. If you have not made use of the exemption in one year, it can be carried forward and used the next year. The exemption can be offset against a larger gift, or used to cover several smaller gifts. Certain other small gifts, some gifts on the occasion of marriage and gifts to charitable and political organisations are also exempt.
10. Utilise your ISA allowance
The annual savings allowance for 2009/10 is £7,200 for individuals of 50 or under and £10,200 for those over 50.