You have just a few weeks left to take advantage of any year-end tax planning opportunities.
Some of these opportunities will be lost if not used before the tax year end 5 April 2020
1. Sale of Property – If you are in the process of selling a house which you lived in at some stage and you are now renting out, take steps to ensure the sale is completed before 5 April 2020. Changes re lettings relief and PPR relief could mean your tax liability is much higher if the sale is completed after 5 April 2020
2. CGT payment window – If your sale of residential rental property is completed before 5 April 2020, you don’t have to pay any CGT liability until 31 January 2021. However, if your sale completes after 5 April 2020, you will have to pay any CGT liability and file a return within 30 days of the completion date.
3. Capital Gains Tax – The CGT annual exemption amount for 19/20 is £12,000. This means you can generate capital gains of up to £12,000 from investments tax free. This allowance is per individual and is on a use it or lose it basis
4. ISA allowance – Make use of your ISA allowance of £20,000 for the 2019/20 tax year – this is the maximum amount that can be paid into ISAs before 5 April 2020.
5. Junior ISA – Contribute towards a Junior ISA on behalf of your child / grandchild – the maximum they can save is £4,368 this tax year.
6. Reduce your taxable income – High earners could reduce their taxable income by making pension contributions (up to £40,000 for everyone earning under £150,000) and charitable donations. This could help you:
a. Regain your tax free personal allowance which starts to be withdrawn for incomes over £100,000.
b. Avoid losing child benefit which is gradually removed if one parent earns more than £50,000.
7. Gifting Allowance – you can give away up to £3,000 each tax year Inheritance Tax (IHT) free.
a. You can also make use of any unused part of your gifting allowance from 2018/19 in the current year.
b. Using this year and last year’s allowance, a couple could potentially remove £12,000 from their estate before 5 April 2020 without any IHT implications.
8. Annual Investment Allowance – For sole traders, partnerships and limited companies, the Annual Investment Allowance (AIA) of £1million is available as a potential 100% deduction against your taxable profits for 19/20. This relates to qualifying capital expenditure on long-term business assets (plant & machinery, fixtures and fittings, excluding motor cars.) You may wish to consider accelerating any planned capital investments before the end of the tax year to potentially reduce your taxable profits.
9. R&D tax credits – Research and development (R&D) tax credits are an incentive available for limited companies that that spend money developing new products, processes or services. Companies should review their activities and consider if any of their activities include elements of R&D. The tax reliefs available for R&D can be extremely advantageous.
10. Dividend allowance – You can earn dividends up to £2,000 tax free in the 2019/20 tax year. If your company has sufficient distributable reserves, it may make sense to pay a dividend before 5 April 2020.
If you would like more information on how you can make the most out of your finances within the 2019-20 tax year, contact our team today.