Personal tax planning

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As the end of the year 2015/16 tax year approaches, I have summarised some of the main tax reliefs and allowances available to you that you may want to consider and utilise before it is too late.

Pension Contributions:

Although a minefield to some, we firstly can look at the key facts on pension contributions:

n The maximum annual contribution is £40,000

n You can carry forward unused relief from 2012/13, 2013/14 and 2014/15 – you must utilise unused relief from 2012/13 by April 5, 2016

n Relief can be claimed at your highest applicable tax rate

n The maximum stakeholder pension contribution is £3,600 per year.

If your income exceeds £121,200 you might consider making a pension contribution to reduce your income below £100,000 in order to maintain your personal allowance which decreases by £1 for every £2 your income exceeds that golden £100,000 mark.

Transferrable Personal Allowance: It is now possible for one spouse to transfer up to 10% of their personal allowance to the other, provided neither are higher or additional rate tax payers, beneficial to couples where one is earning above and the other below the personal allowance of £10,600 per annum.

Savings Rate Band: From April 6, 2015 there is a 0% tax band on income from savings up to a limit of £5,000. This will only apply if an individual’s total earned income and pension is below £15,600, in which case any savings income up to the limit of £15,600 will be free of tax.

Dividend Taxation: As discussed in one of my previous blogs, the way in which dividends are taxed will change on April 6, 2016. The notional 10% tax credit on dividend income will be abolished and instead the first £5,000 of dividend income will be tax free, with the balance taxed at either 7.5% (basic rate taxpayers), 32.5% (higher rate taxpayers) or 38.1% (additional rate taxpayers).

If you are able to, accelerating planned dividends to before this date allows them to be taxed under the current rules. Another consideration is utilising your spouse’s tax allowance and lower rate band by transferring shares.

Capial Gains Tax: The CGT exemption for 2015/16 and 2016/17 is £11,100. You should consider realising gains before the end of the tax year to utilise this exemption as it cannot be carried forward.

This item is of course not exhaustive, and we are always more than happy to discuss individuals personal circumstances to ensure that you take full advantage of any reliefs available.