Tax planning to consider before the end of the 2014/15 tax year

The 2014/15 tax year finishes at midnight, on the 5 April 2015. There are a number of tax planning opportunities that should be considered before this date. We have outlined below the areas that you should consider reviewing including income tax, capital gain tax, and inheritance tax.

Income Tax

Personal Allowances

• An individual’s personal allowance is reduced by £1 for every £2 of net income earned over £100,000, i.e. for income between £100,001 and £120,000 the effective top rate of tax is 60%.
• If the above applies, making charitable donations or pension contributions to reduce taxable income to below £100,000 could be beneficial.
• If spouses do not fully use their personal allowance (£10,000 for the 2014/15 tax year) or basic and higher rate tax bands, consider gifting income producing assets to them.

ISA Tax Free Limits

• For 2014/15 the ISA limit is £15,000, this can be split however an individual chooses i.e. cash and/or stocks and shares. Consider utilising this limit before the end of the year.
• The Junior ISA limit for children under the age of 18 for the 2014/15 tax year is £4,000. Consider taking advantage of this relief where available.

Tax Efficient Investments

• Enterprise Investment Schemes, Seed Enterprise Investment Schemes, Social Investment Relief and Venture Capital Trusts can provide tax reliefs subject to a yearly maximum.
• These investments are complex; tailored advice should be taken before participating.

Capital Gains Tax (CGT)

Annual Exemptions

• The yearly exemption is £11,000 for the 2014/15 tax year and this cannot be carried forward.
• Consider realising capital gains pre 5 April 2015 to utilise the annual exemption fully.
• Alternatively assets could be gifted to spouses or civil partners so that they are able to utilise their annual exemption for CGT purposes.

Capital Losses

• Assets that have fallen in capital or have no worth may be claimed as capital losses and offset against capital gains.
• If capital losses relate to shares in a company that is not recognised on any stock exchange, it is possible to offset the loss against income.

Tax Year Planning

• It can be useful to delay realising significant capital gains until after the 5 April 2015 to defer payment of tax for a year.

Inheritance Tax (IHT)

Exemptions

• Gifts of up to £3,000 can be made without any IHT consequences. This exemption can be carried forward from the previous tax year.
• There are also other exemptions available:
  • Small gifts exemption – a gift of up to £250 can be made to any number of people IHT free
  • Gifts in consideration of marriage by a parent – up to £5,000 can be gifted IHT free

Edwin Coe LLP has significant experience assisting taxpayers seeking to structure their tax affairs efficiently. If you require further information about planning prior to the end of the tax year please contact a member of our Tax Services team.

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