The 2015/16 Tax Year draws to a close very soon on the 5th April 2016 but there are a few actions which you can still take to help reduce your tax burden.
Here are some of the things you might want to consider:
1. Use your ISA Allowance
ISA's provide a tax free environment for your savings. Your ISA allowance for 2015/16 is £15,240 and the full amount can be invested in a Stocks & Shares ISA or a Cash ISA or any combination of the two.
2. Maximise your pension contributions
You can currently invest up to £40,000 into a pension fund in a tax year and obtain full tax relief on those contributions.
However from 6 April 2016 this annual allowance for those earning above £150,000 is to be reduced on a tapering basis so that it reduces to £10,000 for those earning above £210,000. For every £2 of income above £150,000, an individual’s annual allowance will reduce by £1.
3. Make charitable contributions
Consider making charitable Gift Aid donations before the end of the tax year which will enable you to benefit from higher rate income tax relief for the year.
4. Use your annual Capital Gains Tax exemption
Everyone is entitled to a Capital Gains Tax annual exempt amount of £11,100 for 2015/16. You can make optimum use of this by careful timing of disposals which crystallise gains and losses, making negligible value loss claims where appropriate, and in some cases transferring assets between spouses or civil partners before disposal. If you are planning a disposal (unless it's of a residential property which is not your own home) in excess of the exemption, consider deferring the transaction until after 5 April 2016 when the Capital Gains Tax rates fall to 20% for higher rate payers and 10% for basic rate payers.
5. Preserve your Personal Allowance
Your personal allowance (£10,600 for 2015/16) is phased out where your income is between £100,000 and £121,000 resulting in an effective rate of tax of 60%! If your income is within this range consider making pension contributions or charitable donations as mentioned above. This will help to reduce the impact of losing your personal allowance.
6. Own a buy-to-let property?
The 10% wear and tear allowance available to landlords is abolished from the 6th April 2016. It will be replaced by a form of renewals allowance. It means that the cost of replacing furnishings in a rental property (whether let furnished or unfurnished) will be allowable as a deduction.
If you currently claim the wear and tear allowance you may wish to consider deferring replacing items such as moveable furniture, white goods, carpets, curtains, linen, crockery or cutlery until after the 6th April 2016.
If you need further information about these tax-saving tips don't hesitate to contact the PayStream Tax Team on 0161 929 6000.