Tips and Advice – Pre-Tax Year End
01 March 2018 12:46
Transfer income producing assets to spouse / civil partner
You are able to transfer assets such as property or investments to your spouse / civil partner provided it is an outright gift with no conditions attached.
If you are a higher rate tax payer, consider transferring income bearing assets to your spouse.
Likewise, could you utilise your spouse’s zero percent dividend band of £5,000 (£2,000 from 6 April 2018)?
With the restriction to interest relief on residential rental properties, spouses / civil partners should review the ownership of such properties.
Use your Pension Allowance
Pension contributions are still a tax efficient way of saving for retirement, with tax relief given at your marginal rate of income tax. Tax relief is restricted to the lower of £40,000, or your net relevant earnings. It may also be possible to utilise unused allowances from the previous three tax years.
It is possible to obtain 60% tax relief on pension contributions. For example, the effective tax rate for earnings between £100,000 and £123,000 (2017/18) is 60% due to the loss in personal allowance.
Specialist advice should be sought if you are considering making pension contributions.
Transfer Marriage Allowance
In 2017/18, £1,150 of your spouses / civil partner's personal allowance can be transferred, providing that neither the transferor nor recipient is liable to income tax above the basic rate band.
Gifts of £3,000 can be made annually, with no impact to potential IHT charges. This £3,000 (or an amount unused) can be carried forward one tax year.
There are also reliefs available on gifts out of income, and gifts to any one person up to £250 annually, though various conditions will need to be met.
Capital Gains Tax
If you are considering selling an asset, consider utilising your spouse’s annual exemption of £11,300 (2017/18). Or, is it possible to sell part of the asset prior to 5 April 2018, and the balance after to utilise more than one year’s exemptions?
The 2017/18 limit overall is £20,000, which can be invested in cash or stocks and shares. Income and gains from ISAs are tax free, so utilise the annual limit where possible.
The above points are meant as a guide only and should not be relied upon as advice. Your affairs are specific to you, so why not take advantage of our FREE health check should you have any queries.