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CMA Accountancy Top Tips to Help You Pay Less Tax in 2016/17
So the Budget’s come and gone and we’re now into a new tax year. Here we look at what you can do to ensure you’re in the best financial position for the coming year.
Take action now to structure your tax affairs effectively for you and your business.
Tax Tips for Individuals
Introduced in April 2015, there’s evidence that not everyone entitled to claim marriage allowance has actually done so. If you’re a basic rate taxpayer and your spouse doesn’t work or they do not pay tax, consider the benefits offered by the marriage allowance. The lower earning partner who is not fully utilising their personal allowance can transfer up to £1,100 of their allowance to the higher earner, resulting in tax savings.
ISA savings and investment accounts
Under the ISA rules, interest on cash savings and gains from investments are tax-free.
So, if possible, you should consider making full use of your ISA allowance, which is £15,240 for the 2016/17 tax year and £20,000 for 2017/18. Although the investment itself doesn’t attract any tax relief, any income generated from it will be tax-free.
Capital Gains Tax
Every year review your investments to take advantage of the £11,100 annual exemption. This exemption cannot be carried forward, if you do not use it you lose it.
Remember that the annual exemption is per individual, so if you are married you essentially have a £22,200 annual opportunity to take advantage of. If you transfer an asset to your spouse, then it does not trigger a capital gains tax charge, so that’s a valuable consideration if you want to take advantage of the higher combined allowances.
Tax Tips for Business Owners
From 6 April 2016, the new Dividend Allowance means that the first £5,000 of your dividend income is tax-free.
Family-owned companies – to take advantage of the £5,000 dividend allowance, family-owned businesses may want to consider restructuring their share capital. Don’t forget that the allowance applies to higher rate taxpayers too!
For dividend-paying share portfolio investments - Married couples should spread their dividend paying share portfolios between them to take advantage of each individual’s allowance.
Research and development (R&D) tax relief
If your company’s involved in making advancements in science or technology, you could potentially benefit from tax credits. This could be up to 130% additional enhancement of your R&D spend and if you’re loss-making, it could enable a Corporation Tax refund or cash credit.
Maximise your pension contributions
The annual allowance for pension contributions still remains at £40,000 for 2016/17 for most tax payers. Consider taking advantage of the pension rules and particularly, if relevant, the option to carry forward contributions from the previous three years, if the full pension contributions were not made in those years.
Employer’s National Insurance (NI) allowance
The rules for employer’s NI allowance have changed. The allowance increased to £3,000 from 6 April 2016, however you are excluded from making a claim if you are a company with one director and no employees. If you are a one-director company, contact us for ways to make your business as tax efficient as possible.
These a just a few examples of what can be done to help to minimise your tax liabilities.
Before you take any action you really should take advice on your personal circumstances. If you would like to get in touch then please feel free to email us on email@example.com and we would gladly help you.