Year-end tax planning

10th March 2020

With the gloomy daily news at home and abroad dominating our lives at the moment, we should not lose sight that as we rapidly approach the tax year-end, we should still make time for some year-end tax planning.

With the caveat that our suggestions may well need to be revised following the Budget this Wednesday the 11 March when we expect some important announcements, what areas could individuals consider when it comes to preparing for the end of the tax year?

Pension contributions.  Unlike ISA allowances which have to be looked at on a use-it or lose-it basis, in some circumstances pension contributions can be carried forward for up to three years. Those who have yet to optimise their contributions in respect of previous years may therefore wish to review contributions now before the allowance for the 2016/17 tax year is lost.

There are also a number of scenarios in which, from a tax planning perspective, individuals can benefit by optimising contributions within the tax year. For example, making pension contributions could help to reduce reportable taxable income, thereby enabling individuals to make better use of the personal allowances available. This applies particularly for those earning in excess of £100,000 who may be subject to a tapered personal allowance as well as those earning over £50,000 and who are in receipt of child benefit.

Charitable donations. Gift aided charitable donations are another way of reducing adjusted net income, thereby potentially benefitting those who may otherwise be subject to a tapered personal allowance or the high income child benefit charge.

Capital Gains Tax. The capital gains tax allowance for the 2019/20 tax year is £12,000. As with the ISA allowance this cannot be carried over until the next tax year. It may therefore be worth reviewing assets such as investments or shares held outside an ISA wrapper.

Main residence relief and lettings relief.  Changes which take effect from the 6 April 2020 could materially affect the amount of CGT payable or relief available on disposal of certain properties. There isn’t a lot of time left in the tax year, but those affected whose sales are already going through might benefit from working with agents to ensure that the disposal takes place before the end of the tax year.

Inheritance tax. Individuals can make gifts of up to £3000 per year without them being added to the value of their estate for inheritance tax purposes. This allowance can be carried forward for one year only. Additional payments may also be made in certain circumstances such as the wedding of a relative, help with the living costs of a minor or gifts out of normal income.

Thompson Jenner’s Head of Taxation Geoff Fraser commented. “Whilst some of the tax scenarios such as optimising pension contributions for high income individuals can be somewhat complex, effective planning could result in a reduction to annual tax bills. With the end of the tax year rapidly approaching we would recommend that those looking towards year- end tax planning contact us in good time in order that options can be properly explored.

We expect some further important announcements at the Budget this week on the 11th March and will be reviewing these at our annual Budget breakfast briefing on 12 March at Woodbury Park”.

As always, our tax team will be on hand to unravel the detail to explain what the Budget really means for individuals and businesses in Devon and across the South West.

Our experienced and friendly tax team are always happy to help with any Devon business or personal tax issue. Why not give us a call on 01392 258553 or 01395 279521 to find out more about our tax planning services or to arrange a free initial meeting.

Sign up and stay informed