Planning for a year's prosperity
- Income tax
- Capital gains tax
- Inheritance tax
- Sole traders, partnerships, and companies
- Dividend or bonus?
Use your personal tax allowances and reliefs
- Capital and the related income can normally be transferred between husband and wife or civil partners without any tax liabilities. Such transfers must be outright gifts and can be made free of both capital gains tax and inheritance tax
- Consider paying your husband/wife/children a salary for working in your business
- Consider taking your husband/wife/children or other family members into partnership
- Consider one-off or recurring donations to charity.
Benefits in kind
- Keep records of business trips showing the date, mileage, and purpose of trip to satisfy HMRC queries
- Consider reimbursing your employer for the full cost of private petrol to prevent the car fuel charge applying
- Remember that no tax is charged on beneficial loans totaling less than £10,000 per employee.
- Check that your pension arrangements are adequate, especially if you are self employed or not in a company scheme
- Take advantage of the maximum allowable contributions which are fixed at the level of earnings in the tax year (or £3,600 if greater)
- Employees in a company scheme may consider paying additional voluntary contributions to help boost their final pension or may consider contributing to a registered pension scheme.
- What action should you take to invest in your pension within the current limit of £40,000 in 2015/16?
Capital gains tax
- This year you are entitled to £11,100 (£11,000 2014/15) of net gains free of tax. Plan disposals to make use of this exemption
- Consider deferring disposals until after 5 April to delay capital gains tax payment by a full year and maximise taper relief
- If you intend to retire from business in the next few years, plan ahead to minimise tax on disposal of your business or family company
- If you have more than one home, consider making or revising an election to determine which one will qualify for the CGT exemption
- Claim losses on assets that have become worthless
- Consider EIS deferral relief, which allows you to defer gains on disposal of any chargeable asset against investment in new ordinary shares in a qualifying unquoted trading company.
- Review your estate planning strategy
- Review your Will
- Consider lifetime gifts to individuals or trusts (gifts to spouses are exempt)
- Maximise business property relief and agricultural property relief
- Life assurance policies can be used as a way of making gifts to beneficiaries, and also to build up sufficient money to pay any IHT that may eventually become due
- The annual £3,000 exemption applies to both husband and wife or civil partners and can be carried forward for one year, but then used only if the exemption for the later year is utilised
- Other reliefs are: £250 small gift exemption, marriage gifts exemption, and gifts for charities, national purposes, public benefit, and political parties.
Year end tax planning for sole traders, partnerships, and companies
The following planning pointers focus on the accounting year end rather than the tax year end:
- Defer income/advance expenditure - there is relief on 100% relief of up to £500,000 on qualifying capital expenditure. This relief ends on 31 December 2015. A new limit is yet to be announced. Contact us to determine your entitlement.
- Companies may defer sales of chargeable assets until after the year end, thereby deferring capital gains
- Sole traders and partnerships may consider advancing the sale of chargeable assets if current year capital gains annual exemptions have not been used
- If your business is seasonal, consider changing your accounting date. The tax rules associated with such a change are complex and great care on the selection of an alternative accounting date is required
- Accelerate bonuses to staff and directors
- Make extra employers' contributions to pension schemes
- If you are thinking of embarking on a new business venture, bring forward the commencement date to offset any initial losses against current year's business profits
- Gains made on the sale of business assets may be rolled over on certain classes of business asset against purchases of replacement assets. Consider whether you need to bring forward the purchase of a replacement asset to enable this relief to be used.
Dividend or bonus?
- It is normally more tax effective to pay a dividend than a bonus
- Consider the timing of dividends and bonuses with regard to the personal tax position of company shareholders.
Do call us if you would like help with your tax planning.