• Claiming an extra £720 by contributing into a family pension scheme is also an option. Any UK resident can contribute up to £2,880 (net) into a pension, irrespective of their earnings, and the pension provider is able to obtain 20 per cent tax relief from HM Revenue & Customs. This means the pension is credited with an extra £720 so that the gross contribution amounts to £3,600. Therefore, taxpayers should consider contributing to a pension for a non-working spouse/civil partner or children to benefit from this available tax rebate.
Capital gains tax (CGT)
CGT rates are currently favourable compared to income, at 20 per cent (or 28 per cent in some cases). There are important points to bear in mind however, as follows:
• Do not forget your CGT tax-free amount. If you have the ability and flexibility, consider realising capital gains before the end of the tax year in order to utilise the annual exempt amount (£11,300 this tax year). If you do not use the annual exemption it cannot be carried forward and is lost. Each individual has their own tax-free amount, so clients could consider also gifting assets to their spouse or civil partner (which is tax neutral) so that they are able to make a disposal and use their own CGT annual exemption.
• Claiming previous losses is also an option. If a client has sold any assets and realised a loss, make sure they claim the loss on their tax return. If they do not claim the loss within four years, the loss is effectively forfeited. Therefore, capital losses for the tax year 2013 to 2014 not previously claimed should be claimed by 5 April 2018.
Inheritance tax (IHT)
The old cliché of death and taxes is never as relevant as for IHT. Many individuals prefer not to think about this, but each year a number of use it or lose it reliefs are available which can add up to significant savings:
My first tip is that gifts of up to £3,000 in total can be made each year without any IHT implications. If the £3,000 exemption was unused in the previous tax year, this can also be carried forward so the maximum available exemption can be up to £6,000.
Tip number two is other exemptions are available, for example for small gifts of up to £250 per recipient and gifts in consideration of marriage of up to £5,000 by a parent.
My third tip is regular gifts out of a surplus income are not subject to IHT, so being able to show a pattern of gifts can remove this from a person’s estate immediately. To be accepted, you must be able to show you have maintained your standard of living after the gifts.
Investments and dividends
Tax-efficient investments should also be considered as part of any tax planning exercise and Isas are an obvious solution: