The run-up to the tax year end on 5 April 2015 is the perfect time to consider tax planning opportunities and to put in place strategies to minimise tax throughout 2015/16.
With some prior preparation, you could arrange your financial affairs to minimise the impact of tax on you, your family and your business.
Here are some simple ideas:
- For umbrella contractors - check that you're Tax Code for 2015/16 is correct. HMRC often work on outdated information about your personal circumstances and the PAYE Code Numbers that they issue frequently reflect this.
- Both umbrella and limited company contractors should be taking advantage of the New Individual Savings Account allowance. From 6 April 2015 the annual investment limit increases to £15,240.
- This can be allocated to a Cash NISA or a Stocks & Shares NISA or split between both types. Interest received and gains made on these investments are tax-free. Higher-rate taxpayers don't have to pay any further tax on dividends from investments either and you don't have to declare NISAs on your Tax Return.
- Take advantage of tax reliefs for pension contributions to build a pension fund for your retirement. Personal contributions to pension schemes attract tax relief at your highest rate and will be of particular interest to umbrella contractors whilst limited company contractors also have the opportunity to make employer contributions through their own company.
- If you are married and do not own assets (such as a let property), in some form of joint ownership, it may be advantageous for tax purposes for transfers to be made to ensure joint ownership. Consider transferring savings and investments to your spouse if they pay a lower rate of tax than you do.
- Although complex rules apply this can be a worthwhile strategy providing savings of income tax, capital gains tax and even inheritance tax.
- If you are in the habit of making charitable donations to good causes, try to make them under the Gift Aid scheme. Charities can reclaim tax on any donations made by individuals, whether large or small, regular or one-off.
- Gift Aid donations are regarded as having basic rate tax (20%) deducted by the donor. If you are a higher rate taxpayer (40%) you can claim the additional tax relief to reduce your higher rate liability.
- There is now a claw back of Child Benefit once a member of the household claiming the Child Benefit has income in excess of £50,000 in the tax year. The whole value of the Child Benefit is withdrawn if that person's income exceeds £60,000. You may want to consider opting out of claiming Child Benefit if you are in that situation.
Most good tax planning is simple, legal and easy to achieve but it should always be tailored to fit your individual circumstances. Whether you are an umbrella or limited company contractor there will usually be something which you can do to mitigate your tax liabilities.
If you would like PayStream's Tax Team to take a closer look at your tax and financial position and suggest what you can do to maximise your income and reduce your tax liabilities please call 0161 929 6000 and ask for the Tax Advisory service. We work in collaboration with PayStream's Financial Services partner, Haven Global Strategies, to provide the best solution for you.