Rugby Club Issue 55 | Page 111

Are you paying too much tax? 10 tax tips Would you like the opportunity to reduce the taxman's take from your own and your family's income? If so read on, as carrying out an annual review of your tax affairs could significantly reduce your own and your family's tax liabilities. The tips in this document are available to most taxpayers. 1) Personal Tax returns need to be with HM Revenue & Customs by 31 January at the latest. If you want them to calculate your tax and send you a statement of the amount due, the return needs to be filed by the 30 September. A fixed penalty of £100 applies if a return is not filed by 31 January following the end of the tax year. These penalties can rise to £1600 if a return is up to a year late. It pays to file on time. 2) Review investments to make sure you have made appropriate payments where necessary. Every taxpayer should have a cash ISA: all interest is tax free. The limit of contribution is £15,240 per annum (tax year 2015/16) and the cash can be withdrawn if needed – but cannot then be returned (although there is a proposal in the Budget that money paid in to an ISA can be taken out again on an annual basis). These are arranged directly with a bank or building society and no commission is paid out so you keep all your money. 3) Review your pension contributions. Paying additional contributions to obtain tax relief at 40% or 45% is a good investment. If a sum exceeding £10,000 as an additional contribution is envisaged then opening a single premium fund is worth considering. SIPPS are always worth considering for pension funds of over £50,000 to reduce management charges. There are restrictions on how much, if any, additional payments can be made and obtain higher rate tax relief. 4) Married couples and those in civil partnerships should arrange their affairs to ensure that their personal allowances and the basic rate band of tax are used to the fullest possible extent. This may require transfers of investment income but remember that this can only be achieved where the beneficial interest in the underlying capital is also transferred. Spousal transfers can be used to avoid income based age allowance restriction for people aged over 65. These also need to be considered for Capital Gains where each spouse currently has an annual exemption of £11,100. 5) Are your children making the most of their personal allowances? If they have income from a bank or building society account and the total income for the year is less than their personal allowance, then the child (or the parent on their behalf) can register to receive the income gross without deduction of tax. However, if the income is derived from money that the parent has put aside on the child’s behalf then the income will be taxed as the parent’s income (at the parent’s marginal tax rate) while the child is unmarried and under 18 years of age. 6) Review any claims for working tax credits and child tax credit. Claims for credit will need to be made within three months of the start of the tax year. Be sure to check out your eligibility. The Treasury estimates that over £2billion per annum is unclaimed in pension credits, child tax credits and working family credits. 7) With regard to Inheritance Tax planning, you can give away up to £3,000 per year without an inheritance tax liability arising and, since unused allowances can be carried forward for one year, you may be able to give away as much as £6,000 this year depending on the gifts you made last year. In addition, you can give away a further £250 per individual without becoming liable to inheritance tax. Similar allowances apply to wedding gifts depending on your relationship to the couple. (N.B. These limits are unchanged from 6 April 1981!) 8) Payments to charity by Gift Aid are tax efficient. The charity will receive an additional 25% of your donation plus higher rate taxpayers can claim a rebate of 20%. The Gift Aid procedure is now very simple and available to all charities which includes all churches. 9) All life insurance policies should be written in trust. This is a very simple procedure which the insurance company can arrange. Otherwise the proceeds will fall in to the insured’s estate with IHT at 40%. 10) Capital gains tax. For non business assets the rate of CGT will depend on other income and will be 18% or 28%. For assets held jointly it is worth considering a transfer between spouses to utilise both annual exemptions of £11,100 and to reduce the rate of CGT. For business assets the situation is much simpler with the rate of CGT being 10% under Entrepreneur’s Relief which has a lifetime limit of £10M. We would be delighted to discuss these tips with you, outlining any appropriate action you may need to take relevant to your particular circumstances. Book your FREE consultation with Peter Lashmar today. Our office in The Square, Pennington offers free off-street parking and disabled access. Evening and weekend appointments are available on request. Find more tax tips on our website: www.lashmars.co.uk where you can also sign up for our free monthly newsletter. 01590 688838 [email protected] www.lashmars.co.uk Headmaster’s Halls, The Square Pennington, Lymington SO41 8GN ©Lashmars Tax Accountants Ltd 2015 This communication is intended to provide general guidance on matters of interest and you should not act or refrain from acting upon any information contained in it without seeking appropriate professional advice.