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o the dreaded “January the 31st” (or more like February 2nd due to the public sector union strike) has just gone by but guess what? The tax year end is upon us again with the 5th of April just round the corner. This means another year of tax affairs is coming to a close; it also could mean that huge taxes will be payable in nine months time! What could you possibly do in these last few days that could possibly make a difference? Well, here are a few tips for you to help ensure you are maximising all the annual allowances, reliefs and exemptions available to you this tax year: Make use of your ISA Allowance Although there is no tax relief, an Individual Savings Account (ISA) is a tax-efficient scheme as you pay no capital gains tax and no further tax on the income making it one of the most tax efficient schemes available. If you are planning to open or even transfer an ISA you already have, you have until the 5th of April but it’s dangerous to leave it until that date so you don’t lose the allowance. The HMRC details that the application must have been received and processed by the 5th of April by the ISA provider to qualify for the 2011/12 allowance. There are two main types of ISAs: Cash ISAs and Stocks and Shares ISAs. Cash ISAs work like your normal savings accounts but you do not pay income tax on the interest you earn. With stocks and shares ISAs, you can invest in individual stocks and shares or investment funds and any profit you make is not subject to capital gains tax. Note however that you pay 10% on dividend earnings. The Maximum amount you can put in a Cash ISA this tax year is £5,340 and £10,680 for Stocks and Shares ISA. As long as you have not exceeded the current £10,680 limit, you have until the 5th of April to invest and make the most of your allowance. Jointly owned assets Are you a married

couple jointly owning an income generating asset? It would be assumed that you each own 50% of the income even where the asset is owned in unequal shares. Consider your tax bands as it may be more beneficial for one partner to take all the income, this way you maximise the allowances available to each of you. This would however mean that the asset must be transferred to their sole name, but that could be a great way to save some more tax this year. Capital Gains Tax Allowance If you have assets which have appreciated in value, make sure your annual allowance for 2012/13 - £10,600 is being utilised. Pensions You can increase your contributions to adjust your income below tax and personal allowance thresholds. If you are currently a higher rate tax payer (i.e you earn over £35,001), then it means your contributions to a pension scheme may qualify for 40% income tax relief. This means that a payment of £1,000 will actually cost you £600 so consider making more contributions into your pension fund. The higher rate tax band starting amount will change to £34,371 in the next tax year 2012/13. If you have taxable earnings of over £100,000 in the current tax year, it is important to consider advice to restore the personal allowance which is gradually taken away as soon as the earnings go over the £100,000 limit (it reduces by £1 of every £2 of earnings). If you are concerned about your overall retirement planning, book an appointment with your adviser. One planning area that is often missed is funds payment for a lower earning spouse or child – You can make contributions for members of your family and everyone now has an annual allowance for pension payments of £3,600 whether they pay income tax or not. Giving to Charity Don’t forget that as a higher rate tax payer, you get a tax relief for


Please do remember that you MUST pay an amount of Income Tax or Capital Gains Tax at least equal to the tax that Jesus House will claim on your donation in the tax year (currently 25p for every £1). To work out if you’ve paid enough tax to cover your donations, divide your donation value by four. For example, if you give £100 in a particular tax year you will need to have paid £25 tax over that period. (This bit is already in note 5 of the article so

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donations made under gift aid to charity in the tax year and this could reduce your tax bill greatly. Do plan carefully to ensure you have paid enough tax to cover the gift aid repayment so you don’t have to pay further tax to the HMRC as this is one area that is often missed. To work out if you’ve paid enough tax to cover your donations, divide the donation value by four. For example, if you give £100 in a particular tax year you will need to have paid £25 tax over that period. Inheritance Tax planning If your estate (all your assets) exceeds £325,000, then you should consider ways of reducing your inheritance tax liability. There is an annual allowance of gifts of £3,000 that allows for a small sum to be transferred from your estate immediately. This allowance is per person so for a married couple that’s £6,000. You could also consider establishing a pattern of regular gifts which may be treated as exempt e.g. making settlements into trusts. Investments for Children and Grandchildren A good man leaves an inheritance for his children’s children. Prov 13:22. National Savings Children’s Bonus Bonds are still available for children under age 16. The limit is £3,000 for each child, currently 2.5% AER compound guaranteed over the first 5 years, then a fixed rate notified at each 5th anniversary to age 21 and a final bonus on the 21st birthday; they are tax-free even if the funds are provided by the child’s parents. Finally, do you plan on leaving the UK? This may sound funny but formalising your exit arrangement to coincide with the tax year end can often be a sensible approach and although it may not coincide with the tax year in your intended country of residence, it makes sense to formally exit the UK on the 6th of April if practical. *It is very important that you seek financial advice before utilising any planning tips*

should I be repeating?) If in the future you no longer pay tax, it is imperative that you notify us so that we can suspend or cancel your declaration. Kindly notify us of any changes to your personal details. You can cancel your declaration anytime by calling the finance office. If you have any questions about Gift Aid; how it affects you or would like a short workshop on the Gift Aid management and effects, please contact the finance office on 0208 438 8285.

Outflow March 2012  

Outflow magazine March edition