Don’t leave it until January next year

During the month of February most Accountants are sitting back thankful that the annual chaos of tax return January is over. They will have spent most of the month chasing clients for information and having some difficult conversations with clients about the amount they are due to pay.

However, this doesn’t need to be the case. A simple conversation with your Accountant now can easily take away some of the pain that might just have been experienced. If you are able to gather together a rough estimate of what might be on your tax return to 5th April 2012 your Accountant should be able to give you an idea of the tax payable now rather than January 2013. More importantly however they might be able to give you some ideas on how to minimise your liability.

Here are some basic things to think about but these need to be carried out prior to 5th April 2012 so start planning now and be sure to take advice before acting –

Pension Contributions

With the rules forever changing in this area, ensure that you maximise your relief by topping up. If you’re not a fan of pensions consider an alternative ISA strategy. Both are valuable if you are a higher rate taxpayer. You can invest £5,340 into a cash ISA and the same amount into a stocks and shares ISA or the full £10,680 into a stocks and shares ISA. Seek independent financial advice first.

New Business equipment

Depending upon your yearend consider purchasing new equipment for your business but only if you are going to buy the equipment anyway. There’s no point in just spending money to save tax. Tax relief on equipment is reducing and it will take longer than ever to get full tax relief in many instances.

Personal Allowance

Make sure if you are eligible for the allowance that you use it. Alternatively if you have a spouse or a civil partner who is not fully utilising their allowances, consider transferring sufficient income producing assets to them.

Capital Gains

Capital Gains Tax is generally a voluntary tax in that you decide when to sell something that triggers the tax. That puts you in charge. Every individual has an annual exemption which is currently £10,600. Use it or lose it. If you are married or have a civil partner, consider transferring some of the asset or some of your stocks and shares first to them before disposal to use their exemption if they are not already using it. In addition consider structuring your disposal so that you trigger a gain in say March and again in April. This will allow you to use two year’s exemptions in short succession to maximise your return and save tax.

If you don’t actually want to sell anything consider ‘bed and spousing’. This means that you can sell say some stocks and shares to the marketplace to use your annual allowance and your spouse can buy them back. This books the asset in your spouse’s hand at current market value without triggering any tax but uplifts the value for any future disposal. You cannot do this yourself as there is a 30 day ‘buy back’ rule preventing it.

Inheritance Tax

Again ensure that you use available reliefs. You can gift up to £3,000 a year which can double to £6,000 if you don’t use the relief in any one year. Make sure you have a Will and that it is up to date and keeping pace with your life. Consider a Power of Attorney too. A Will deals with your affairs on death but you need to ensure your affairs are administered if you are unable to look after yourself for any reason. You and your spouse or civil partner have a nil rate band of £325,000 each. This is transferable on first death so ensure that your Will makes best use of this.

Until next time


Simon can be contacted on 0141 290 0262 or follow him on twitter @simonmurrison