With February already upon us and tax return self-assessments done and submitted, there is one more thing to do before taking a break from your tax affairs for a while. If you haven’t yet made the most of your allowances, whether personal or business related, then now is the time to do so while there is still time to reap the benefits before the end of the financial year. Talk to your independent financial advisor to get started and if you still haven’t got around to finding one, either use our guide to help you – what to look for in an independent financial advisor – or get in touch with our team at www.plutuswealth.com.
It is worth remembering that circumstances will differ and there is no one-size-fits-all method, but the key is that there are a number of tax allowances that are worth considering which may work for you. The following is an outline of the main ones as a starting point.
Key dates to remember
There are a few dates that are important to keep in mind:
- 5 April 2019 – financial year end
- 31 October 2019 – deadline for filing paper tax returns
- 31 January 2020 – deadline for filing online tax returns
While the return deadlines give you plenty of time to get things organised before filing, if you do want to make the most of your allowances you will have to get things implemented before 5 April, otherwise they will not be applicable to the 2017-2018 financial year.
Tax allowances – pay and personal
Perhaps the most obvious place to start is with your and your staff’s tax thresholds and allowances. Make sure you are making the most of the personal tax-free allowances, applicable at an annual income that is below £123,700. For the full rates and thresholds breakdown visit HMRC’s website.
Also look at any potential capital gains tax allowances if you have sold a second property, business interests, or shares. The allowance for this financial year is £11,700. If you have shares that you are earning dividends on, you do not have to pay tax on any earnings up to £2,000.
When it comes to savings, you have a couple of options. If you are a higher-rate tax payer, you have an allowance of £500 in interest on your saving and up to £1,000 as a basic rate tax payer. Investing in an ISA offers you the option of saving up to £20,000 for this tax year without paying any income or capitals gains tax on your earnings. There are four types of ISA and you are allowed to invest in one per year. Find the one most suitable for you and your circumstances before the end of the tax year.
Your pension is another way to save and a way to get tax relief on the contributions you make. With so many different options on the market there will be one that works for you and allows you to the most of your money. Talk to your independent financial advisor to find the one that works best for you.
Finally, donating to charity and Gift Aid can also bring tax relief opportunities. If you are a higher or additional rate tax payer, you can claim back the tax relief through your return which can reduce your tax bill substantially as there is no upper limit to such donations.
Tax allowances – business investments
Investing your money to help new and small businesses or social enterprises to grow is another way in which you can reduce your end-of-year tax bill. However, these are higher risk investments and typically suitable for more experienced investors or those who have a higher tolerance of risk as the probability of failure, and therefore losing all or part of your investment, is higher. To attract investors and offset this high risk they do offer generous tax benefits – full details can be found here. They also require investment over the medium to long term – in other words around four to ten years – and so are not something to consider if you are looking for shorter-term, more certain gains.
Examples of these sorts of investments include:
- Venture capital trusts
- Enterprise investment scheme
- Seed enterprise investment scheme
- Social investment tax relief
Talk to your independent financial advisor for more information on whether these are suitable for you and what the risks and benefits are before making any decisions.
If you need to make the most of your allowances before the tax year end but are unsure of what works best for you get in touch with us at Plutus Wealth. With a team of qualified and experienced independent financial advisors we are well placed to help get you the most out of your money. Give us a call on 020 7871 5200 or email us at info@plutuswealth.com to get the conversation started.
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