Top planning tips for the year end

Published on 4th March 2019

Personal Planning
With the end of the 2018/19 tax year fast approaching, ensure that you are capitalising on available allowances and minimising your tax liability.

Maximising the personal allowance
The basic income tax personal allowance (PA) for an individual is set at £11,850 for 2018/19 (this is restricted where adjusted net income exceeds £100,000). Transferring income as an outright gift to a spouse with little or no income can help to make the most of allowances across the family.

Considering the Marriage Allowance
The Marriage Allowance may benefit married couples where one spouse earns below the PA and the other is not a higher or additional rate taxpayer. Up to £1,190 can be transferred to the lower earner, reducing overall tax liability by up to £238.

Making the most of tax-free savings
With the annual ISA allowance, you can save up to £20,000 tax-free for 2018/19.

Increasing contributions into your pension scheme also provides tax relief (restricted to the higher of £3,600, or the amount of UK relevant earnings). Contributions over £40,000 are generally taxable.

All payments must be made before 6 April 2019.

Business planning utilising capital allowances
An Annual Investment Allowance (AIA) can be claimed on most plant and machinery expenditure (except cars).

Following the recent AIA increase from £200,000 to £1 million,  complex calculations may apply to expenditure incurred from 1 January 2019 to 31 December 2020.

Extracting profits
The Dividend Allowance reduction to £2,000 in April 2018, makes the choice between salary/bonus or dividend less obvious.

Unlike dividends, a salary is taken before corporation tax is deducted. However, national insurance of up to 25.8% is due on any salary taken.

Other ways of extracting profit include considering making pension contributions and making the most of tax-free allowances, such as mileage payments.

For more year end planning tips, please contact us.