With the end of the tax-year rapidly approaching, here are just a few key things to be thinking about regarding your personal finances.
- Utilise your pension contribution allowance. This is currently a maximum of £40,000 for 2018/19 (subject to your earnings). However, you may also be able to carry forward unused allowance from the last 3 years.
- Higher earners can take steps to reduce their taxable earnings through pension contributions and charitable donations. Thus, benefitting from potential tax savings.
- Bring your income to below the additional rate tax band, which starts at £150,000. This not only potentially saves you income tax at a rate of 45% but may also mean you regain a reduced pension input allowance.
- People who earn over £100,000 start to lose their personal allowance by £1 for every £2 they earn over £100,000. Earn over £123,700 and your personal allowance is zero. In effect, translating to a 60% tax rate on this band of income.
- Avoid losing Child Benefit, which is gradually removed if income is more than £50,000.
- Make use of your ISA allowance of £20,000 for 2018/19. The ISA allowance is lost at the end of the tax year.
- Utilise your annual Capital Gains Tax (CGT) exemption by realising gains of £11,700 in this tax year. If you have a large liability, you may look to realise gains over two or more tax years, or even use the tax-free interspousal transfer.
- Plan for inheritance tax. Inheritance tax has been described as the ‘voluntary’ tax as it can be mitigated with some proactive planning. Use your IHT gifting exemption of £3,000 for this tax year. This can be back-dated for up to one year if it wasn’t previously used.
- Ensure you have made the most of your allowances. Making the most of your personal allowance, savings allowance and dividend allowance will maximise tax-free income.
If you would like any advice or further information on the above, please don’t hesitate to get in contact.
Toby Bain DipPFS – Independent Financial Adviser
The above is based on our understanding of UK Tax legislation 2018/19 and does not constitute a personal recommendation or financial advice.