Year-end tax planning: make the most of your allowances and reliefs

Have you used your pension allowance?

Every individual has a pension allowance which will allow them (or a third party) to contribute up to £40,000 in a tax year (subject to roll forward provisions). When you make a personal pension contribution it will extend the amount of income that is taxed at the basic rate. If you haven’t used your allowance you may wish to think about making a pension contribution before 5 April 2018. This is especially pertinent as more landlords will become higher rate tax payers due to the mortgage interest relief changes. It is worth noting that where your income is mainly from rental properties then you may be restricted to paying £3,600 (gross).

Are you and your partner maximising the use of your tax-free personal allowance and basic rate band?

Don’t forget that where you are married or in a civil partnership, assets can be transferred between you free of Capital Gains Tax, transferring income sources between you. Care needs to be taken where mortgages are secured on any properties as a SDLT charge could arise.

Each individual has a tax-free Capital Gains Tax Annual Exemption (currently £11,300). Given the tax-free status of spouse/ civil partnership transfers you may wish to consider transferring a share in any asset before a sale to allow you to utilise two exemptions rather than one.

Are you getting the most from ISAs?

The ISA investment limit for the current year is £20,000. Any unused limit cannot be carried forward so you may wish to consider “topping-up” your ISA.

Consider Seed Enterprise Investment Scheme and Enterprise Investment Scheme investment

These not only reduce your tax liability but also have Capital Gains Tax benefits. Income Tax relief can be granted at 30% or 50% depending upon the investment. Such investments, by their nature, may be viewed as high risk.

Make a gift

You can make gifts of up to £3,000 without any Inheritance Tax consequences. In addition, if you haven’t used last years’ £3,000 you can still utilise it in this year.

We would recommend you speak with a financial adviser when looking to make any pension contributions or investments.