It’s time to get ready for the tax year end

The personal allowance, currently £12,500, is phased out on income between £100,000 and £125,000. This results in an effective tax rate of up to 60% within this income bracket. It may be possible to reduce taxable income through personal pension contributions and eligible charitable donations.

Tax relief is available for cash gifts to UK registered Charities and charitable organizations in the European Union, Norway, Iceland, and Liechtenstein. Income Tax Relief is also available on charitable donations of certain types of assets such as UK Land and quoted securities. The donor receives a deduction from his or her income before tax is applied to it. Charities cannot reclaim tax on the donation of assets.

The amount of tax-deductible pension contributions individuals can claim each tax year is limited to the annual allowance. The standard annual allowance has been £40,000 since 6 April 2014. Unused annual allowances can be carried forward for up to three years. The rules in this area are complex and specialist investment advice must be taken.

Each UK individual has an annual capital gains tax exemption of £12,300. If it is not used it cannot be carried forward and is lost. Assets can usually be transferred between spouses and civil partners without tax. If an asset standing at a gain is transferred to a spouse who sells the asset, the gain realized by the recipient spouse may be covered by his/her capital gains tax annual exemption. In order for this to be effective any gift of assets must be absolute and unconditional.

Capital losses must be claimed within four years of the end of the tax year in which they are realized, meaning capital losses realized in 2016.17 must be claimed by 5 April 2021. It may be possible to claim a capital loss on assets or investments which have fallen in value and are now worthless and on loans made to trading companies that have become irrecoverable. Where a capital loss relates to shares in an unquoted trading company, it may be possible to off-set the loss against income which would otherwise be subject to income tax at up to 45 per cent.

Any UK resident individual under 75 years can contribute to £2,880 net into a stakeholder pension each year, irrespective of their income or employment status. These pensions can be funded for non-working spouses and children and the policy will be credited with a gross contribution of £3,600. The funds will not be accessible until the minimum pension age currently 55 years. The government has confirmed that it intends to increase the minimum pension age to 57 years in 2028.

For further information, contact Seamus on (028) 82241515