Given that many personal tax reliefs and allowances are given for a tax year, it is important to take time in the last few months before 5 April 2017 to review what can be done to ensure you are fully benefiting from them.
Here we mention a few key reliefs to think about.
Relief for pension contributions
Normally, full tax relief is available for those making gross pension contributions up to £40,000 each year, but since the start of the current tax year on 6 April 2016 this allowance is tapered away for those paying the top rate of income tax, giving a maximum annual allowance of £10,000 for those earning £210,000 or more . However, relief can be carried forward for three years, so those with unused relief from 2013/14 who are caught by the new restriction should consider utilising brought forward relief before it expires on 6 April 2017. Contributions greater than £10,000 could be made and still attract full tax relief.
In some cases, tax relief up to 60 per cent could be available for pension contributions, so a review is well worthwhile.
Pension contributions for other family members such as spouses and adult children should also be considered, given recent changes that allow greater flexibility and the potential for an inheritance tax free pot to leave the next generation.
Enterprise investment scheme
With alternative funding of businesses, such as crowdfunding, growing rapidly, investors should remember the generous enterprise investment scheme (EIS) and related seed-EIS (SEIS) reliefs.
EIS can give 30 per cent income tax relief and SEIS 50 per cent income tax relief. Both give the ability to mitigate (defer (EIS) or partially exempt (SEIS)) tax on capital gains made on other assets and capital gains exemption applies to the new shares subscribed for.
If you are looking to invest in someone else’s business, these reliefs should not be overlooked.
£5,000 of dividend income and personal allowances
The new dividend allowance came in during this tax year, allowing everyone up to £5,000 of tax free dividends. It is worthwhile ensuring that spouses and civil partners are maximising this allowance between them so that one partner is not paying tax on dividends while the other still has available dividend allowance .
The generous annual personal allowance should also not be overlooked and couples should consider maximising use of this allowance between them each year.
Individuals living in the UK who are non-UK domiciled (non-doms) face a significant change in the tax regime that applies to them from April 2017.
All non-doms in the UK, whether they have been claiming the remittance basis or not, should review their affairs before the new rules come in.
While the above comments only highlight some key reliefs and allowances, our private client compass can help you navigate through many of the other tax reliefs and allowances. Further reliefs could be available depending on personal circumstances and a discussion with your RSM adviser is always recommended.
For more information please get in touch with Gary Heynes, or your usual RSM contact.