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As we approach the end of the tax year – 5th April 2015, there is still time to take action to ensure that tax allowances and exemptions are fully utilised. Listed below are just a few areas to consider before the end of the tax year. These have been separated into actions for Companies and actions for individuals.
For Companies and Company Directors
The new £2,000 employers allowance provides relief from paying employers NIC on the first £2,000 of contributions. This relief started on 6th April 2014 and is available tom most employers. You should seek advice from your accountant to make sure your company is eligible for this relief.
Take advantage of the temporary increase in the Annual Investment Allowance (AIA) to £500,000 before 31st December to provide 100% tax write off for equipment purchases.
Personal Allowances for Company Directors
Ensure that you have paid yourself the optimum mix of salary and dividend to maximise your personal allowance and higher rate tax band. Seek advice from your accountant to ensure your company drawings are tax efficient.
If the payment of bonuses to directors or dividends to shareholders is under consideration, give careful thought as to whether payment should be made before or after the end of the tax year. The date of payment will affect the date tax is due and possibly the rate at which it is payable.
Remember that any bonuses must generally be provided for in the accounts and actually be paid within nine months of the company’s year end to ensure tax relief for the company in that period.
Company Cars and Fuel
Employer provided car benefits are calculated by reference to the CO2 emissions and the car’s list price. The level of business mileage is not relevant. The greener the car, the lower the percentage charge. No benefit currently applies for an electric car with other cars attracting a benefit charge ranging from 5% to 35% of the list price of the car. Always seek advice when looking at changing benefit arrangements in this area as the impact on the employee is specific to their personal circumstances.
For Individual Tax Payers
Open an ISA
You can shelter upto £15,000 this tax year, before the 5th April 2015. Contributions can be split between a Cash ISA and a Stocks & Shares ISA. Investments in an ISA are protected from any further income tax and there is no tax on any capital gains.
Contact your IFA to discuss the options. Remember, if you do not use your ISA allowance by 5th April, it will be lost forever.
Use your pension allowance
Pension changes come into effect from 6th April. These make pensions more attractive than ever to most investors. If you are under 75 most people can contribute to a pension scheme and receive income tax relief (upto 45%). If you are a non taxpayer or under 16 you can still contribute and receive tax relief.
Use your capital gains tax allowance
This tax year, you can realise gains of up to £11,000 without paying tax. If you have not used this allowance and are holding shares outside of an ISA or SIPP that are showing a gain, consider selling these and utilising your capital gains allowance.
Reduce your inheritance tax liability
You can gift up to £3,000 from capital each tax year, which will be exempt from inheritance tax. Additionally, you can carry forward any unused amount from the previous tax year. This means that a married couple could gift up to £12,000 (£6,000 each) before 5th April. Larger giffs over £3,000 are normally tax free providing the individual making the donation survives a further seven years.
Enterprise Investment Scheme Investments
If you are looking for new investment opportunities, consider EIS, which offers income tax relief of 30% as well as capital gains tax relief.
Seed EIS Investments
These investments are similar to EIS investments but offer tax relief of up to 50% and a capital gains exemption on disposal.
If you are a higher rate tax payer make sure that these donations are classified under gift aid so that you can obtain additional tax relief.