We know it's hard to focus on much else other than COVID-19 at the moment; dealing with the change and upheaval to our personal and professional lives means some priorities may have been put to the way side, including year end tax planning.
With this is mind, our tax team have compiled a list of key considerations that you need to think about before 5th April, to help you ensure you’re not overlooking anything.
Here are the topics you need to consider when year end tax planning:
1. If your spouse does not use all of their personal allowance, they should think about electing to transfer part of it to you to reduce the overall family tax burden
2. For small family companies, if you have not already extracted cash by way of dividends in the tax year 2019/20, you should think about declaring a dividend to ensure the shareholders use their dividend nil rate band
3. Make sure you use your savings nil rate band of £1,000; this means that £1,000 savings are tax free. This reduces to £500 for higher rate taxpayers. For additional rate taxpayers it is withdrawn.
4. Check your 2020/21 notices of coding which will have now been issued to ensure you are on the right tax code for the new tax year
5. Have you used up your annual capital gains allowance of £12,000 for 2019/20 and claimed any capital losses incurred during the year?
6. Currently, up to £20,000 can be put into an ISA and needs to be used by the 5th April 2020
7. If you wish to make gifts to family members, do make use of the IHT exemptions available in each tax year; gifts of up to £3,000 per year can be made IHT free. This increases to £6,000 if the previous year’s allowance has not been used.
8. As part of your end of tax review, you should review your Will to ensure that it is tax efficient and it still reflects your future wishes. If you don’t have a Will, you should consider drafting one.
9. Annual pension allowance can be carried forward for 3 years. However, you need to be a member of a pension scheme in that time. Unused relief for 5th April 2017 needs to be utilised by 5 April 2020.
10. Where an individual has income in excess of £110,000, the pension relief is tapered. The relief of £40,000 per tax year is reduced by £1 for every £2 of income in excess of £150,000. Where a taxpayer has income of £210,000 there is a full reduction of their allowance to £10,000.
Hopefully you’re a little clearer on what you need to do, and where to start with your year end tax planning. If you’d like to discuss any of the areas covered, please do not hesitate in getting in touch with a member of our tax team.