Consider reorganising how income and assets are split between you and your spouse to take advantage of personal allowances (currently £11,500) and minimise any higher and additional rate tax (income over £150,000 is taxed at 45%). Consider savings allowances, pension contributions and if you’re a company director, ensure you’re taking advantage of your dividend allowance.
If you are a business owner or hold investments ensure you take advantage of the £5,000 dividend allowance, which means you won’t pay tax on the first £5,000 of dividends that you receive in the tax year.
The capital gains tax (CGT) annual exemption for 2016/17 is £11,300. If you haven’t already used your exemption, do you have assets you need sell or transfer before 6 April? If you’ve already used it and need to sell or transfer assets, wait until after 6 April. Consider whether transferring assets between you and your partner might save tax prior to any disposals, as well as Entreprenuers’ Relief and whether your assets qualify for the lower 10% rate of (CGT).
Review your investments to ensure you’re taking advantage of the income tax, dividend and CGT advantages.
Everyone is entitled to an Individual Savings Account (ISA) allowance of £20,000. There is also a Junior ISA allowance for children under 16, so ensure you take advantage. Also consider other investment options such as Enterprise Investment Scheme (EICS), SEED Enterprise Investment Schemes (SEIS) and Venture Capital Trusts (VCTs), although it’s important to ensure you seek advice as these often carry a higher risk.
Changes to tax relief allowances on buy to let mortages/loan interest means that tax planning opportunities need to be explored asap. Incorporation may be an option but you will need to consider the associated CGT and Stamp Duty charges.
The maximum annual allowance for pension contributions is £40,000 and includes contributions made by both individuals and employers. Ensure you use your annual allowance. Also, if you haven’t contributed up to the annual allowance in previous years, you may be able to carry forward any unused amount into 2016/17.
The pension lifetime allowance (LTA) reduced from £1.25m to £1m from 6 April 2016. If your pension fund is worth more than £1.25m, it’s worth exploring whether you are eligible to apply for protection. However, this will need to be done before 5 April 2017.
It’s important that you seek advice from a trusted financial advisor prior to making any decisions or changes regarding your pension.
Inheritance Tax (IHT) can be charged at 40% on your estate and on gifts you’ve made. There are IHT reliefs available, but it’s important that you use them. Each year you can make gifts of up to £3,000, which are exempt from IHT. If you haven’t used your previous year’s allowance, you can also claim it.
Until 5 April the IHT nil rate band is available for your main home and is frozen at £325,000.
Although not directly related to year-end planning, now is a good time to review your will to ensure it meets your wishes and takes into outcount the forthcoming changes.
If you have made charitable donations and made a gift aid declaration, you may be able to claim up to 25% in tax relief, potentially reducing your higher rate tax amount.