End of Year Tax Saving
It s not very long before the close of the tax year draws near. It is essential to make use of any personal allowances and tax breaks that are obtainable.
By using the exemptions and annual allowances you will potentially bring down your tax bill substantially. This can usually be done quick and easily with the help of a financial advisor.
Tax effective investing
Individual savings accounts
Individual Savings Accounts (ISAs). If you are aged over 50 your Isa allowance for the current tax year is now £10,200. ISA’s are free from capital gains tax, can be used to provide an income and are one of the most tax efficient investment products that can be used
Pensions
Pensions are also a tax efficient way of saving for retirement. Most people can contribute up to £3600 gross each tax year and obtain basic rate tax relief on the contribution. 40% taxpayers can claim the residual on their self assessment.
Capital Gains Tax Opportunities
If you have made profits on certain types of investments you may be able to use your annual capital gains tax allowance. This will enable you to make gains up to this threshold without incurring a liability to tax. In some cases it is also possible to carry forward previous year’s losses.
Income Tax Opportunities
Each individual can receive a personal allowance of £6,475 without acquiring any income tax. For espoused couples or civil partnerships, where one is a forty percent taxpayer it is worth looking to see who owns the investment and perhaps look to transfer assets into the
BR taxpayers name.Making gifts is also a way of keeping down your liability to income tax.
Inheritance Tax Planning
Each individual can give an IHT exempt gift each year of up to 3,000 in a tax year. Any unused allowance can be carried forward for one yr only. If you are able to make gifts out of income without it changing your standard of living you may be allowed to make gifts over the yearly exemption level.
If you consider your estate could be above the IHT nil rate band then efficient tax planning can be employed to cut back your estates possible inheritance tax liability. This could include a suitably drafted will or instead trust provision.
Graham Bond is a Financial Advisor based in Chipping Sodbury, Bristol.
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