With the end of the 2018/19 tax year fast approaching (5th April 2019), it is important to consider whether you have made full use of the tax allowances which are available.
Each UK tax payer has an annual allowance of £40,000 which can be invested into a pension. The allowance can be carried forward for a maximum of 3 years, so if no contributions have been made in prior years there could be allowances of up to £160,000 available, including the current year.
For limited companies, contributions are allowable for tax purposes resulting in a reduction in corporation tax liabilities.
For sole traders and partnerships, tax relief is available at the highest rate of tax resulting in a reduction in income tax liabilities.
Dividends up to £2,000 are tax free for each tax payer. For those who are married, an effective way to utilise this exemption would be to ensure assets returning dividends are jointly owned by spouses meaning both individuals allowances can be used.
Individual Savings Accounts (ISA’s)
Up to £20,000 per tax year can be invested by each tax payer into ISA’s. Interest and capital gains from returns generated by funds held within an ISA are not subject to income tax or capital gains tax. With funds generally available to withdraw at any time, ISA’s offer a tax efficient investment while also offering an element of flexibility to the individual.
For married couples or civil partners where one spouse earns below the personal allowance (£11,850) and the other is not a higher rate tax payer, there is the opportunity to transfer 10% of your personal allowance.
These are just a few of the options available – for more details please contact us via e-mail on firstname.lastname@example.org or phone 01324 441250.