As the 31st January tax return filing deadline passes, another one looms! The 5th April signifies the end of another tax year, leaving two months to ensure your 2018/19 tax affairs are in order.
- Whilst the tax benefits of sacrificing salary have been restricted since April 2017, individuals can still benefit from income tax and national insurance savings for a number of benefits; including employer pension contributions, childcare, and low-emission cars. Alternatively (annual allowance and relevant earnings permitting) consider a personal pension contribution to reduce your higher rate tax exposure.
- Should your employer not reimburse business mileage incurred using your private vehicle at HMRC approved rates (45p per mile for the first 10,000 miles and 25p thereafter), ensure you keep mileage records for a post-5-April expense claim.
- If part of an employee share scheme, review the plan rules to determine whether it is worth exercising options or acquiring scheme shares in this tax year.
- Looking to upgrade your company car? Consider future changes to the benefit-in-kind rates (CO2 emission based charges are already known for 2019/20 and 2020/21).
- Utilise tax-efficient wrappers for your savings were possible.
- As a corporate owner, the two key thresholds for higher rate taxpayers are £100,000, where the personal allowance begins to taper and £110,000 where the company’s ability to make an employer pension contribution could be impacted. Ensure income extraction efficiencies are maximised this year and plan for 2019/20.
- Unincorporated and still carrying forward historic overlap profits? If the past year has not been as positive as recent history, now may be the time to utilise them by extending the year-end. The value of these first-year profits are only reducing the longer you hold onto them.
- Evaluate the asset split based on income streams to ensure, as a couple, the overall tax liability is minimised.
- Review life policies to ensure the family is protected financially.
- Make sure you have sufficient earnings to accumulate qualifying years for a full state pension entitlement.
Close to retirement?
- Review your lifetime allowance position with your IFA and consider your final pension contributions and extraction plans.
- Consider the opportunity to utilise your tax-free capital gains tax annual exemption (£11,700 for 2018/19), crystallising capital losses or the use of EIS deferral relief.
- At this time in life having a retirement plan which looks to mitigate Inheritance Tax for your beneficiaries may be high on your priority list. If so, start the seven-year cycle of trust creation or simply recording regular gifts out of excess income. Consider generation skipping, trusts for grandchildren’s school or university fees being a popular choice of grandparents.
- Ensure your wealth is protected, diversified and held in suitably flexible wrappers.
- As a business owner, the hope is by now, that succession plans have been agreed and are set to be implemented. Make sure any final values are agreed between the parties and extracted tax efficiently.
Whichever stage of life you have reached, Albert Goodman’s tax and financial planners, offer joined-up and pragmatic advice to suit your needs.