Top-ten tax planning tips

1 Considering small gifts for staff this Christmas?

Some time ago HMRC introduced “Trivial Benefits” legislation. In some respects, this is far from trivial. Basically, non-cash gifts – not related to work or performance – that cost employers £50 or less to provide, are tax-free. This definition applies to each gift. The only limitation placed on this relief is if gifts are made to directors of small companies. In which case the number of £50 gifts that can be made in a tax year is £300.

2 Have you ever let part of your home?

From 6 April 2020, certain reliefs that reduce Capital Gains Tax if you have let out all or part of your home at any time, are changing. Accordingly, if you are considering selling the affected property you might be advised to sell before 6 April 2020 and benefit from the present, higher reliefs.

3 Thinking of selling a second home or investment property?

If you do, and if you are thinking of selling at some time in 2020, you might be advised to sell before 6 April 2020. From that date you will only have 30 days to report the disposal to HMRC, submit a Capital Gains Tax computation and pay any tax due. If you sell before 6 April 2020, any gains will need to be returned on your 2019-20 self-assessment tax return. The deadline for filing this return and paying any tax due is 31 January 2021.

4 Do you provide or use a company car?

Many employers provide a company car, and some pay for all the fuel costs, even those that cover any private use. If this is your situation you may want to consider repaying your employer for the private fuel costs. If you do this the swingeing Car Fuel Benefit charge will no longer apply. To ensure that you do benefit from this suggestion it would be sensible to work out the cost of any private fuel provided and compare this with the tax you pay on any taxable benefit. As a rough guide, if your private mileage is low – compared to business mileage – then repaying your employer for any private use may be beneficial. Call if you need help crunching the numbers.

5 Do you use your private vehicle for company journeys?

Employers can pay up to 45p per mile for company related trips in your car and if these journeys clock up more than 10,000 miles in any tax year, the rate per mile drops to 25p. As long as the above rates are applied any mileage expenses paid will be tax-free. If rates paid are higher, any excess will be taxed as a benefit. Conversely, if your employer pays less than the approved rates you can claim the difference against your tax.

6 High income earners – avoid 60% marginal tax hit

 As soon as your taxable income in a tax year exceeds £100,000 your personal tax allowance is gradually reduced. This means that for 2019-20, once your income reaches £125,000 you will no longer qualify for the £12,500 personal tax allowance. In this band – between £100,000 and £125,000 – you will not only pay 40% income tax but will also lose the benefit of your personal tax allowance. The marginal rate of Income Tax is therefore 60%. Obviously, it is worth spending time considering how you could plan your tax affairs to avoid this 60% tax hit. We can help.

7 Make the most of annual reliefs

Both Capital Gains Tax and Inheritance Tax have annual reliefs and exemptions, that if utilised, mean that gains and gifts up to the permitted amounts will be tax-free. Check out our website for details or call for more information. 

8 Married or in a civil partnership?

It is possible to transfer assets between married or civil partners without triggering a tax charge. This is particularly useful if the asset considered produces income, say a bank deposit or an investment property. If one partner pays tax at basic rates (or does not pay tax) and the other partner pays tax at higher rates, then transferring all or part of the asset – with rights to share the income – makes sense. Obviously, there are non-tax considerations that need to be considered and if a property is involved stamp duty may complicate issues, but this may be an effective strategy to boost after-tax family income.

9 Transferring unused tax allowances

If either partner in a marriage or civil partnership does not use all of the personal tax allowance, and the other person is a basic rate tax-payer, then any spare allowance – up to a permitted maximum – can be transferred. This can produce tax refunds of up to £250 a year; and the claim can be back-dated.

10 Pensions and investment planning

Make sure you maximise your ISA investments and pension contributions for 2019-20. Both can produce tax efficient benefits. The amounts you can invest will be dictated by your income and other statutory limits. Call your financial adviser for advice. We can also help with planning the most effective tax-saving strategy.

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