Act now for tax breaks
Sunday 28 March 1999
It is now or never to start checking what needs to be done. The following list covers the main points you should be watching out for:
Plan for old age. Tax relief on pension payments is generous, so use it. Employees in a company pension scheme can put up to 15 per cent of net relevant earnings into their pension or as additional voluntary contributions (AVCs). Contributions based on 1998/99 earnings must be paid this tax year. The self-employed and employees who are not in company pension schemes may make contributions into personal pension plans. Contributions paid this year will reduce this year's tax liability and next year's payments on account. Unused tax relief for pension payments can be brought forward from the last six years.
Be generous. If you have assets that will create an inheritance tax (IHT) bill when you die, it makes sense to give some away. You can give small gifts up to the value of pounds 250 to as many people as you wish. Larger gifts worth up to pounds 3,000 a year are also exempt from IHT. The pounds 3,000 exemption can be carried forward for one year, so there's no rush to pay out before 5 April. Both husband and wife can make these gifts.
Use those gains. Anyone who has made large capital gains, from rising share prices for instance, should consider selling enough assets to use up their annual capital gains tax exemption of pounds 6,800 per person this year. A married couple can make tax-free gains of pounds 13,600.
The allowance is lost if not used before 6 April. Make sure you do not buy back the same shares within 30 days or you will fall foul of the rules against "bed and breakfasting".
Save for a rainy day. Tessas (tax-exempt special savings accounts) will be replaced by individual savings accounts (ISAs) next year, but Tessas can be opened with cash deposits of up to pounds 3,000 this year (see page 14). You can open a Tessa account with a smaller sum before 6 April and still save up to pounds 9,000 tax free over the next five years.
Something ventured. Wealthier investors prepared to take risks should look at venture capital trusts (VCTs) and enterprise investment schemes (EIS).
Both offer big tax breaks. There is income tax relief at 20 per cent on EIS investments up to pounds 150,000 and on VCTs there's tax relief to pounds 100,000, plus CGT deferral on both.
An even more generous 100 per cent income tax relief is available on Enterprise Zone buildings or investment trusts. Payment is due by 5 April.
Drive down your tax rate. The more business miles you drive in your company car the lower the tax rate, so if you are just under one of the thresholds - 2,500 or 18,000 miles - hit the road now.
Give to charity. If you are a top-rate taxpayer giving more than pounds 250 to charity (going down to pounds 100 next tax year) or making covenants, then you will benefit from 17 per cent tax relief.
Trust income. Trustees of discretionary and accumulation and maintenance trusts, which are taxed at 34 per cent, may want to distribute some income from the trust to basic-rate or non-taxpaying beneficiaries. Take care in case the distribution increases the beneficiaries' tax rate.
n Frank Collingwood is a chartered tax adviser and president of the Association of Taxation Technicians.
- 1 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 2 What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
- 3 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 4 'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Husband and wife die holding hands within hours of each other after 67 years of marriage
Mohammed Emwazi: Nine things we know about Isis militant 'Jihadi John'
What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
'Jihadi John': Mohammed Emwazi – from British computer programmer to Isis executioner
Madonna claims jokes about her age tantamount to racism: 'No one would dare to say a degrading remark about being black'
Oscars 2015: Birdman beats Boyhood as Eddie Redmayne and Patricia Arquette win big - as it happened
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
This is what it's like to be dead, according to a guy who died for a bit
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...