Last Minute To Do List for Maximum Tax Efficiency in 2017/18The 2018/19 tax year beings on 6th April, so you have a few weeks to review your affairs and ensure you're maximising all of the allowances available to you and being as tax efficient as possible.
Consider pension contributions
Have you taken advantage of the annual pension contributions allowance? You can obtain tax relief on contributions of up to 100% of your earnings in 2017/18 (up to £40,000). This is particularly beneficial for those who are affected by the loss of their personal allowance (income between £100,000 and £123,000).
Fear not however as your pension allowance can be carried forward for a maximum of three-years where it has not been fully utilised, providing you have made some contribution to a UK pension scheme during the preceding periods.
Utilise your tax allowances
With the new dividend rates introduced in April 2016, it is more important than ever to ensure your maximise your tax-free personal allowance of £11,500, and the dividend allowance of £5,000. The dividend allowance will be reduced to £2,000 from 6th April 2018.
Take advantage of ISAs for tax-free interest and gains
You can save £20,000 tax-free per year by saving via an ISA. You get this allowance each year but it cannot be rolled over. Capital growth and interest are earned free of any Capital Gains or Income tax. You can switch funds between cash and stock/share ISAs.
You can also set up a Junior ISA. The limit for 2017/18 is £4,128. Anybody can contribute to a Junior ISA on behalf of a child, but it must be set up by either a parent or legal guardian. Control of the ISA is then handed over to the child once they reach the age of 16, which is then converted to a full ISA at the age of 18. Junior ISAs are a great way for family members or friends to contribute to your child’s future. 16/17-year-olds also get the benefit of the Junior ISA limit PLUS the £20,000 allowance too!
Make use of Inheritance Tax allowances
Everyone can give away £3,000 per year with no Inheritance Tax (IHT) implications via IHT gift allowance. These gifts are then exempt from your estate for IHT purposes. Any unused allowances from the previous year can be carried forward too, giving married couples the ability to make a tax0free gift £12,000 between them
In addition to this, wedding or civil ceremony gifts can also be made. Parents can gift £5,000 to children, £2,500 by grandparents and great-grandparents or £1,000 to anyone else.
Crystallise capital gains
For 2017/18, individuals can make gains of up to £11,300 before incurring income tax. This allowance is lost if not utilised, so you can strategically stagger disposals or gains pre-6th April and post-6th April to receive utilise this twice (the allowance even increases from 6th April to £11,700). Assets in joint names with your partner will mean you have their allowance to utilise too.
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