8 last minute tax tips
Here are 8 ways to pay less tax which you can take action on in the few days before 5th April.
Tip 1 – Individual Savings Accounts (ISA)
Within an ISA there is no capital gains tax or income tax making them one of the most tax-efficient ways to save. And, you can withdraw your money at any time.
Tip 2 – Allowance and bands
Married individuals and individuals in a registered civil partnership can save tax by “moving” income between them. This can be done by transferring savings and investments. Make sure you use all tax-free personal allowances and lower rates of tax.
Tip 3 – Pension contributions
Pension contributions can attract up to 45% income tax relief. Tax benefits depend on individual circumstances and you must pay enough tax to receive full tax relief. Bonus tip – your company can contribute for your spouse and children. You could contribute £2,880 and the government will top this up to £3,600.
Tip 4 – Capital gains
As well as a tax-free allowance for income we all have a tax-free allowance for capital gains. One way to use your capital allowance is to sell shares that have a gain and buy them back in an ISA.
Tip 5 – Losses
Make sure you use income and capital losses and offset them against income and gains.
Tip 6 – Gains are better than income
Tax on income can be 45% compared to 28% tax on gains so it can make sense to hold income generating assets in an ISA and investments that are likely to produce gains in your personal name.
Tip 7 – Venture Capital Trusts (VCTs)
VCTs invest in high growth companies and are high-risk investments.
To encourage investment into the government offers generous tax breaks of up to 30%, which mean a £10,000 investment in a VCT could effectively cost as little as £7,000 after tax relief.
Tip 8 – Gifts to save inheritance tax (IHT)
One of the best ways to save IHT is to make use of the IHT exempt gift allowance.
Everyone can give away up to £3,000 a year and there’s no Inheritance Tax on a gift that was a wedding or civil partnership gift worth up to £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else.