Missed the January sales? It is not too late to grab yourself a bargain
With over a month to go until the end of the tax year, there is still time to score some easy wins and reduce your overall tax liability.
Our tax system may at first appear a mass of complicated regulations which are difficult to understand, and this may generally be true. However, there many features within it, such as tax allowances, tax bands and exemptions, which are straightforward, there to be claimed and, if possible, not wasted.
These allowances are potentially available to all, however there are some restrictions based on overall income. If you have some control over your income stream, such as the amount, the type and when it falls to be taxable, you may be better placed to make full use of these basic features of the tax system.
Income falling within the personal allowance (currently £11,850) is not subject to a tax charge. If your income fluctuates from one tax year to the next you may be able to take action to ensure that your income is more consistent, so that you don’t waste the allowance one year, or loose some or all of it if your income exceeds £100,000. The allowance is reduced by £1 for every £2 of income over £100,000. You may also be able to ensure that you fully utilise the basic rate income tax band from one year to the next (currently £34,500).
If you are in receipt of dividend income, the dividend allowance exempts the first £2,000, so if you are running your own company, you should ensure that you make dividend payments of at least this amount.
The savings allowance works in a similar way, and exempts the first £1,000 of interest for basic rate taxpayers and £500 for higher rate taxpayers, although no allowance is available for additional rate taxpayers.
Capital gains annual exemption
Some thought should also be given to when you dispose of assets that may give rise to a chargeable gain, and if possible sales of assets should be spread over a number of tax years to fully utilise the capital gains annual exemption (currently £11,700) each year. This exempts the first slice of any chargeable gains that you may have in a tax year. You may be sitting on some capital losses which, if crystallised, at the right time, could lead to a more tax effective outcome.
For further information please speak with your usual Kreston Reeves adviser or contact us here or on +44 (0)330 124 1399.
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