Business First Digital, March 2017 Business First Digital Magazine, March 2017 | Page 18

Spring Clean your Finances – Year End Tax Planning by ASM Chartered Accountants

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regular review of your tax affairs ( at least once a year ) is an opportunity to reduce the taxman ’ s take from your family . The period leading up to the end of the tax year on 5 April is one of the best times to review your taxes and finances .
Tax saving tips for the family
Each spouse is taxed separately , and so it is an important element of basic income tax planning that maximum use is made of personal reliefs and the starting and basic tax rate bands .
If you are self­employed or run a family company , consider employing your spouse or taking them into partnership as a way of redistributing income .
Child Benefit If you are in receipt of Child Benefit and either of you or your live in partner ( widely defined ) have income above £ 50,000 then it is possible that you may have to pay back some or all of the benefit .
This could be avoided by reducing income for this purpose .
Examples include making additional pension contributions or charitable donations or reviewing how profits are shared and extracted from the family business .
National insurance matters
If a spouse is employed by the family business it may be worth paying earnings in 2016 / 17 of between £ 112 ( the employee lower earnings limit ) and £ 155 ( the employer threshold ) per week .
There will then be no employer or employee contributions due on the earnings but entitlement to a state retirement pension and certain other state benefits is preserved .
Capital gains tax Annual Exemption
The first £ 11,100 of gains made in 2016 / 17 are CGT free being covered by the annual exemption .
Each spouse has their own annual exemption , as indeed do children . A transfer of assets between spouses may enable them to utilise their annual exemptions .
Consider selling assets standing at a gain before the end of the tax year on 5 April to use the annual exemption .
Investments – are yours tax efficient ? Individual Savings Accounts Individual Savings Accounts ( ISAs ) provide an income tax and capital gains tax free form of investment . The maximum investment limits are set for each tax year and the 2017 limit is £ 15,240 .
To take advantage of the limits available for 2016 / 17 the investment ( s ) must be made by 5 April 2017 . Pension Contributions From the 2016 / 17 tax year the standard annual allowance of £ 40,000 for pension contributions is reduced by £ 1 for every additional £ 2 of an individual ’ s ‘ adjusted income ’ over £ 150,000 .
This means that the Annual Allowance will be £ 10,000 for individuals with annual income of £ 210,000 or more .
The annual allowance takes into account employer and employee contributions .
It is important to take advice on contribution levels because if the total contributions you make , or that are made on your behalf , exceed your available allowance ( including any unused relief brought forward ), a tax charge will arise effectively withdrawing tax relief on the excess contribution .
Landlords – Consider using a Limited Company
With restrictions on loan interest deductions on the way , in some circumstances there may be tax advantages in forming a limited company to take over the running of a property letting business .
As long as the loan interest paid does not exceed £ 2m a year , companies will still be able to deduct interest in full as an expense when calculating their letting profits .
In addition , the company will only pay tax at 20 per cent on the rental profits , but additional taxes maybe incurred when funds are withdrawn from the company .
Using a limited company for your property portfolio may not be advisable for landlords with a small number of properties , but where you have 4 or more properties it should be considered .
Inheritance Tax Review and Update your Will It is vitally important to regularly review and update your Will as financial and family circumstances change and tax rules evolve . Do your Assets qualify for Relief ? Inheritance tax ( IHT ) is payable on the chargeable value of your estate above £ 325,000 . However , several types of asset qualify for 100 per cent relief from IHT once held for two years .
So consider realising your current assets
and reinvesting in business and agricultural assets , shares in private trading companies ( including AIM listed shares ) and trading partnerships .
Cash and buy to let properties do not qualify for Inheritance tax relief , so they will require particular attention .
MOREINFORMATION
ASM Chartered Accountants have six offices in Newry , Dundalk , Dublin , Belfast and Dungannon . The 160 strong team specialises in a range of accountancy disciplines including , corporate finance , insolvency services , forensic accounting , audit & accounting , consultancy services , internal audit , tax , hotel , tourism and leisure .
To speak to Ronan McGuirk , Director , ASM Chartered Accountants , Newry , call 028 302 69933 or email ronan . mcguirk @ asmnewry . com Visit www . asmaccountants . com for further details .
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