5 Important Things to Do Before Tax Year End
On Sunday 5 April, 2015, this tax year will end. This means now is the time to review your finances and ensure you make most of the tax breaks before hitting the deadline.
Before the tax year starts at 6 April 2015, here is a list of things you need to do.
Making use of your ISA allowance
Cash NISAs and stocks and shares NISAs are the two types of Individual Savings Accounts (ISAs). Under the new tax system, the UK resident aged 18 or over can invest up to £15,000 per annum. This £15,000 can be invested in one cash NISA and one stock and shares NISA. Likewise, those aged 16 and 17 also have a £15,000 allowance but can put into a cash NISA. Parents can also invest up to £4,000 into junior ISAs for each of their children under the age of 18 in cash ISA, stocks and shares ISA or both.
Making use of your personal allowance
The capital gains tax (CGT) allowance of every individual is £11,000 in annual basis for the current tax year. So, when you sell assets like shares or property, you can make up to £10,600 this year on these sales before you have to start paying tax (18 % of the profit) on them.
If you have a spouse or have a civil partner who have less tax band than you, transferring assets to them can help in minimising your tax liability on future capital gains. It is because the interest on savings will be according to your spouse or partner’s tax rate and personal allowance. If the married couples and civil partners share out their ownership of joint assets to each make use of their allowance, it can shelter up to £22,000 of gains between them.
Boosting your pension
If you make a pension contribution, you can reduce your tax liability. Such contributions offers tax relief at an individual's marginal rate of tax worth up to 60%. Also, Relief on annual contributions are subjected to the annual allowance of £40,000 in this tax year.
Reducing your inheritance tax bill
If someone dies leaving an estate worth more than £325,000, IHT is paid. This means the tax is charged at 40% on anything above £325,000 threshold and reduces the IHT payable when you die. With the use of your annual exemption, you can also give away £3,000 worth of gifts in each tax year without being liable for IHT. Also, there is no tax on wedding or civil partnership gifts worth up to £5,000 to your child, £2,500 to grandchild or great-grandchild, and £1,000 to anyone else.
Checking your personal allowances
The personal income tax allowance is £10,000 for most this year unless you were born before 6th April 1948 or earn over £100,000. Those born before 6th April 1948 have a higher personal allowance of £10,500 depending on their income. If you have income over £100,000, the allowance for those reduces by £1 for every £2 over the threshold.