insideKENT Magazine Issue 36 - March 2015 | Page 147

BUSINESS PLAN NOW TO MINIMISE YOUR 2014/15 TAX THE END OF TAX YEAR 2014/2015 IS LOOMING, BUT THERE’S STILL TIME TO MAKE SURE YOU’RE ON TRACK TO MINIMISE TAX FOR THE CURRENT YEAR. THE FOLLOWING TIPS SHOULD HELP YOU ON THE WAY TO EXAMINING WHAT YOU CAN POTENTIALLY DO TO KEEP YOUR TAX BILL AS TRIM AS POSSIBLE. Your pension provision is important for your future and can reduce your tax burden today. Utilise your employer contributions to build a retirement fund. Personal contributions to pension schemes attract tax relief at your highest rate. For tax relief against your 2014/15 income, you must pay pension contributions on or before 5th April 2015. The basic annual allowance cap on pension savings is £40,000 for 2014/15. The proposed pension legislation changes – that at the time of writing have not yet been confirmed – may make a difference to the amount you can put into your pension scheme. It is proposed that if you start your draw down post 5th April 2015, your annual allowance for contributions will be capped at £10,000; however, if you start prior to 5th April 2015, even drawing down a nominal amount, you retain the £40,000 annual allowance. You should speak to your IFA about this. Utilise your Capital Gains Tax allowance – when you dispose of assets, only the profit is taxable (the ‘gain’). For individuals, gains in 2014/15 under £11,000 are tax-free. For married couples, that’s a total of £22,000 of tax-free gains each year to take advantage of. Interest earned on cash NISAs is tax-free – you don’t have to declare them on your tax return. Higher-rate taxpayers don’t have to pay any further tax on dividends from investments and there is no capital gains tax to pay when you sell shares or units held in a NISA. From 1st July 2014, the New Individual Savings Account (NISA) allowance rose to £15,000. From 6th April 2015, it has increased again to £15,240 and can be utilised as all cash, all stocks and shares, or alternatively, it can be split between the two. This means married couples, for example, could put up to £30,000 between them into NISAs this tax year (before 5th April), and a further £30,480 from 6th April. Parents can also utilise Junior NISAs, which have replaced Child Trust Funds. Consider using them as a long-term savings option for a child’s future and a very tax efficient way of making gifts to them. In the tax year 2014/15, the Junior NISA allowance is £4,000. This will increase to £4,080 in April 2015. Married couples should consider transferring assets between them. The rules are complex and no one size fits all, but seek advice, as there may be benefits for income tax, capital gains tax and even inheritance tax. HMRC can make mistakes, so check your payslip details. Check that your name, address, National Insurance number, employer’s name and your tax code are all correct. and if the nil-rate band is not used on the first death, it can be used on the second death. Look into Gifting and Lifetime Transfers, as well as writing your assets into Trusts; the rules are complex, so seek professional advice. Life assurance can be used as a way of removing value from an estate, and as a method of paying inheritance tax liabilities. However, if it all seems like a maze, a good accountancy firm – like Wilkins Kennedy – can help you look at your particular circumstances and create a plan. In fact, if you are looking into ways you can improve your tax planning for 2015, then you might like to know about the WK yearend tax planner, which can help you plan for all the upcoming tax deadlines for the year ahead. This is available now at www.wilkinskennedy.com, or alternatively you can contact Wilkins Kennedy for a hard copy – just get in touch. Don’t forget that age pays. If you were born before 6th April 1948, check if you are eligible for an increased personal allowance. If you give to charities, be Gift Aid aware. The scheme enables charities to reclaim tax on any donations made by UK taxpayers. In turn, there are benefits to certain individuals – for instance, people over 65 and higher rate taxpayers. There’s scope to minimise Inheritance Tax (IHT) too. The current allowance is £325,000. IHT only applies above this threshold and at a rate of 40%. Transfers between married couples are exempt from inheritance tax, inter-spouse gifts made in the seven years prior to death can be ignored, 147 Email Partner, Rick Schofield, at [email protected] or call on 01233 629255. www.wilkinskennedy.com