As Friday 6 April bought in the new tax year, Nimesh Shah, partner at accounting, tax and advisory practice, Blick Rothenberg warns individuals to start planning for the new tax year to ensure they don’t miss out on valuable allowances that could save them thousands.
Mr Shah outlines ten new tax year resolutions below:
- Use the capital gains annual exemption of £11,700 for 2018/19 – it can’t be carried forward or transferred to another person (such as your spouse).
- Contribute to your ISA – the ISA allowance for 2018/19 remains at £20,000. If you’re eligible, consider contributing up to £4,000 to a Lifetime ISA, but there are penalties for early withdrawal. ISA allowances cannot be carried forward.
- Maximise the pension annual allowance of £40,000 (but tapered down for someone earning over £150,000 to a minimum of £10,000). You can carry forward unused pension annual allowances for up to three years, so the 2015/16 allowance needs to be used by 5 April 2019.
- Stakeholder pensions for non-earning spouses and children contribute £2,880 and effectively receive £720 free.
- Use the inheritance tax gift exemption of £3,000, which can be carried forward one year.
- Consider transferring income producing assets to the lower earning spouse to utilise their personal allowance and lower tax bands. This allows for more of the tax year to generate the sufficient income to fully utilise the personal allowance and lower tax bands.
- Submit claims for overpaid tax and capital losses relating to the 2014/15 tax year before 5 April 2019.
- If an investment in a Venture Capital Trust (VCT) or the Enterprise Investment Scheme (EIS) is made, consider completing these early so that any tax repayment can potentially be made sooner, or carried back to the previous tax year.
- File your 2017/18 self-assessment tax return early on in the year as HMRC have one year from the filing date of your tax return to issue their enquiry. If any advance payments on account for 2017/18 were made, file the tax return before 31 July 2018, so that the second payment on account could be potentially reduced.
- Make any charitable donations before filing your 2017/18 tax return and you can decide whether you want to carry back the donation to 2017/18 to achieve the tax relief earlier.
Additionally there are several new changes in the 2018/19 tax year. This includes an increase of personal allowance to £11,850, an increase to £34,500 for the basic rate band, the dividend allowance reducing to £2,000 from £5,000, capital gains annual exemption increasing to £11,700, the inheritance tax residence nil rate band increasing to £125,000 from £100,000 and individual landlords being able to deduct 50 percent of their mortgage interest (reduced from 75 percent) with the remaining 50 percent available as a basic rate tax credit.
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