Ten year-end tax planning tips

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As the end of the 2014/15 tax year draws to a close on 5 April 2015, it is worth taking some time to review your affairs and make sure that you do not pay any more tax than you need to. Here are some tips.

  1. Don’t waste your personal allowance. The basic personal allowance for 2014/15 is £10,000. Pay bonuses or salary before 6 April 2015 or transfer income to a spouse or civil partner to prevent their allowance being wasted.
  2. Reduce income below £100,000. The personal allowance is reduced by £1 for every £2 by which income exceeds £100,000. For 2014/15 it is lost when income reaches £120,000. To preserve your allowance and avoid high marginal tax rates consider deferring income, making pension contributions or giving to charity to take income below £100,000.
  3. Keep your child benefit. Child benefit is lost at the rate of 1% for every £100 by which the income of the higher earnings partner exceeds £50,000 and disappears completely at £60,000. Defer dividends, make pension contributions or equalise income with your partner to save your child benefit being taxed away.
  4. Time dividend payments from family companies. No additional tax is payable on dividend payments until total income reaches the basic rate limit (£41,865). If you or your spouse is not already at this limit, consider paying some dividends before 5 April, profits permitting.
  5. Make pension contributions. Tax relief is available on pension contributions to a registered pension scheme up to the available annual allowance (£40,000 for 2014/15 plus unused allowances carried forward for up to three years).
  6. Use your CGT annual exempt amount. You do not pay any capital gains on the first £11,000 of net gains realised in 2014/15. If you are planning on realising a gain and your annual exemption is unused, consider making the sale before 5 April.
  7. Transfer assets to spouse before sale. To ensure your spouse or civil partner’s annual capital gains exemption is not lost, consider transferring assets to them before sale or putting them in joint name. Transfers between spouses are on a no gain, no loss basis.
  8. Use your ISA limit. You can invest up to £15,000 in an ISA in 2014/15. You can also save up to £4,000 per child in a junior ISA.
  9. Make the most of IHT reliefs. Each year you can give away £3,000 free of IHT. You can also make gifts from income, small cash gifts (up to £250 per recipient) and wedding gifts.
  10. Review your company car and fuel. Choosing a cheaper low emission car will save tax. The fuel benefit is rarely worthwhile, particularly as fuel prices fall.

Need to know

Tax planning opportunities depend on personal circumstances. Speak to your tax adviser.