Thursday, April 20th, 2017
As Wolverhampton accountants, Copia Wealth & Tax take a pro-active approach to helping you reduce your tax bill, so here are our 10 tips on effective tax planning for 2017/8.
1.Taxation of dividend income changed significantly from April 2016.
For owner managed business owners who remunerate themselves via dividends rather than salary, the tax payable on dividend income more than £5,000 increased by 7.5% from April 2016. From April 2018, it is now proposed that the tax-free dividend allowance will be reduced from £5,000 to £2,000 so call us if you need to do some tax planning on this.
2. Government keen to reduce the cost to the Exchequer of pension contribution tax relief
For now, pension contributions remain an effective and tax efficient way to extract profits from a business with 25% of your pot being available for withdrawal from age 55 and £40,000 per annum of contributions attracting tax relief (with the opportunity to utilise unused allowances from previous years). Contact us to organise a personalised wealth planning session.
3. Spouse’s allowance
If you work and your spouse either does not or they pay tax at a lower tax rate than you, then you may be missing out on some tax savings if you have investment income. Contact us for further details of our tax services.
4. Transferable marriage allowance
The relief applies where the higher earning spouse is a basic rate taxpayer and the lower earning spouse does not use all their personal income allowance. The lower earning spouse can transfer up to £1,150 of their unused allowance to their spouse so let us know if you need more information.
5. High income child benefit tax charge
If you have children and a member of your household earns over £50,000 then you may need to opt out of child benefit or claim it and suffer a clawback through your tax return. As each partner can earn up to £49,999 without loss of benefit, we may be able to advise accordingly, so let us know.
6. If you earn more than £100,000, don’t fall into the 60% tax trap
Earnings of between £100,000 and £123,000 will be taxed at an effective rate of 60 per cent for 2017/8. If this applies to you, contact us to see if you can reduce your tax payable.
7. Annual capital gains tax allowance now £11,300
Please note that if you do not use your annual allowance, you lose it. Careful planning is required but you could reduce your tax bill on any future capital gains by up to £3,000 per annum. Let us know if you would like to know more.
8. Inheritance tax
It is vital to undertake a review of your wills and liability to inheritance tax (IHT). We regard IHT as a voluntary tax as there are many ways to legitimately have no IHT liability and thus leave more of your estate to your loved ones – our tax planning services are not just for the rich and famous so call us and find out how we can reduce your tax bill!
9. Are you a property investor?
Tax changes include a future restriction on tax relief to 20% on mortgage interest, abolition of 10% wear & tear allowance and increases in stamp duty by 3% on second or more properties. Contact us to organise a review of your property portfolio to determine the full impact and available options.
10. ISA allowances
From April 2017, savers will be able to contribute £20,000 a year into standard ISAs, with the new limit for Junior ISAs being £4,128. The new Lifetime ISA is finally set to launch in April and will be available to savers aged 18 to 40 who will be able to save up to £4,000 per tax year, to which the Government will add a 25% bonus. The funds can be accessed at age 60 or for a first property purchase though there are penalties for early withdrawal.
There is no getting away from it, tax planning can be complex.
Here at Copia Wealth and Tax, Wolverhampton we help our clients avoid the pitfalls and plan accordingly. Just call us on 01902 783172 to discuss how we can reduce your tax bill.