Plan ahead

Last month I wrote about things you could do to save tax if you hadn’t yet filed your tax return.

The filing deadline is now behind us and we are rapidly heading for the next deadline, the end of the tax year.

It’s a date I never forget because it happens to be my wedding anniversary, but it’s one that everyone who pays tax should have marked on their calendar.

What should you be thinking about?

Firstly, some tax savings can only be made in the tax year and if they are not, they are lost for ever.

Relief for pension contributions for example – the tax relief is only given for the year in which the contribution is paid.

Individual Savings Accounts are another example, where the investment must be made in the tax year.

There are other “use it or lose it” allowances. One is the personal allowance and another is the annual capital gains tax allowance.

There are also annual exemptions for interest (up to £1,000 for a basic rate taxpayer and up to £500 for a higher rate taxpayer), small amounts of self-employed income and small amounts of rental income.

Then there are different tax rates to think about – 7.5%, 20%, 32.5%, 38.1%, 40%, 45% and 60%.

You need to think about which tax band your income falls into this year and what, if anything, you can do to move from a higher rate to a lower rate.

For some people, there will be things that can be done between now and 5 April. For others it will be too late for this tax year but not too late to plan for next tax year.

Married couples and civil partners have several opportunities open to them that others do not.

Largely these involve transferring assets to split income in a more tax efficient way, maximising use of allowances and the different tax rate bands.

As with all tax planning, the biggest savings come from taking a long-term view and this is particularly important with inheritance tax, where early planning can yield savings that are simply not available once someone has died (though even then, there are sometimes things that can be done).

Now is a good time to take advice. You may find that you are missing out – and if you are not, at least you will have the reassurance of knowing that you are not.

Paul Aplin is a tax partner with A C Mole & Sons and Deputy President of the Institute of Chartered Accountants in England and Wales; you can follow him on Twitter at @PaulAplinOnTax. He and fellow tax partner Amanda Gunter can be contacted on 01823 624450.