With 5 April fast approaching here are some tax planning points that you may wish to consider. As always please get in touch if you would like to discuss these or any other planning opportunity.

Click through the headings below to get more information...
Maximise use of Personal Allowances
The Personal Allowance available for the year to 5 April 2016 is £10,600 with a higher age related allowance available to those born before 6 April 1938.

Age related allowances have been withdrawn from 6 April 2016 and the Personal Allowance for the year to 5 April 2017 is £11,000.

Personal Allowances taper away once your total income exceeds £100,000 and disappear altogether above an income level of £121,200. Income falling within this band is taxed at 60%! Consideration should be given to ways to ensure your income does not fall in this bracket to effectively obtain tax relief of 60%:

- If possible, consider deferring some income until after 5 April 2016.
- Make Gift Aid donations and/or Pension Contributions before 6 April 2016.

Where one spouse earns income less than their Personal Allowance and the other is not a higher rate tax payer, consider the availability of Transferrable Marriage Allowance.
New Savings Allowance
A new allowance will be introduced from April 2016 which exempts some savings income from tax for most tax payers. The allowance will be:

- £1,000 for basic rate taxpayers
- £500 for higher rate taxpayers
- £Nil for additional rate taxpayers

From this date banks and building societies are no longer required to deduct tax at source on the interest you earn. Any tax becoming due on savings income will therefore be payable in the January following the end of the tax year. High earners and those with significant savings income – BEWARE!

Couples where one spouse is a higher rate taxpayer, or where most savings are in one spouses name may wish to reallocate some savings in order to utilise both spouses’ exempt allowances.
Tax Efficient Savings
Make the most of the available ISA limits:

- ISA’s £15,240 in any combination of cash or stocks and shares.
- Junior ISA’s and Child Trust Funds £4,080


There is no tax on the interest or dividends received from an ISA and any profits are free from Capital Gains Tax.

But…… compare interest rates. It may no longer be tax efficient to hold savings within an ISA paying a lower interest rate unless total savings income will exceed the relevant exempt savings allowance.
High Income Child Benefit Charge
If you receive Child Benefit and your income is slightly over £50,000, consider making Pension Contributions or Gift Aid Donations prior to 5 April in order to bring your taxable income below £50,000 if possible to avoid the clawback of Child Benefit.
Dividends – Big Changes
The taxation of dividends received by individuals changes considerably from 6 April 2016. The Tax Credit regime will be abolished, removing the need to gross up dividend payments.

The first £5,000 of dividends will essentially be tax free with the balance taxed as follows:

- 7.5% on dividend income within the basic rate band
- 32.5% within the higher rate band and
- 38.1% within the additional rate band.

Those with considerable dividend income from personal companies may wish to look at potential advantages from bringing forward or delaying dividend payments where possible in order to obtain the best tax outcome pre and post 5 April 2016.
Capped Income Tax Reliefs
Income tax reliefs not otherwise capped such as Trading Losses and Qualifying Loan interest are limited to £50,000 or 25% of the taxpayer’s adjusted total income if greater. (This does not apply to EIS/SEIS relief.)

Consideration may need to be given to your overall financial position should this apply to you.
Couples
Couples may want to consider splitting their investments between them to ensure maximum use of their allowances and lower tax rates. Those who own their own business could also consider the payment (to both) of income through salary, dividend or profit share. The opportunities for the two latter routes have remained for companies and partnerships respectively following the Government’s decision not to (at least for now) introduce legislation to counter this form of income shifting. However, earlier rules on what constitutes an appropriate commercial arrangement must still be considered.
P11D Benefits in Kind
Thinking ahead now could avoid problems being identified during P11D completion when it is too late to rectify them.

For example, where you have an overdrawn director’s loan account, reducing the balance before 5 April might give a lower beneficial interest charge if the standard averaging method of calculation is to be used.

For employee/director loans, if the loan is kept below £10,000 continuously throughout the year no interest charge will arise.

PAYE legislation is changing. You are now able to payroll most benefits in kind which would avoid the need to complete P11D’s for each employee. To do this you would need to ensure your payroll software is compatible and you would also need to register with HM Revenue & Customs using the online Payrolling Benefits in Kind service by 5 April 2016.

Take advantage of the new ‘trivial benefits’ exemption from 6 April 2016 for small non-cash benefits not exceeding £50 (£300 cap for directors and their families).
Pensions – Doubling up of Annual Allowance
New legislation was introduced on 8 July 2015 which, depending upon when your Pension Input period falls may open up the opportunity to double your available Annual Allowance.

A potential Annual Allowance of £80,000 has been made available for the year subject to a maximum of £40,000 within the period from 9 July 2015 to 5 April 2016.

Any unused annual allowances from tax year 2012/13 available to carry forward need to be used before the end of the tax year otherwise they will be lost.

From 6 April 2016 the Annual Allowance of £40,000 will be reduced for individuals with income above £150,000 by £1 for every £2 that adjusted income exceeds £150,000 down to a minimum of £10,000 for individuals with income of £210,000 or more.

The lifetime allowance is to reduce from £1.25m down to £1m from 6 April 2016. This change could have a significant impact on retirement planning for wealthy individuals. If this could affect you, you should seek further advice.
Furnished Holiday Lets
In order to obtain the tax breaks available for Furnished Holiday Lets the ‘available to let days’ should equal or exceed 210 days (30 weeks) and the ‘actual let’ days should equal or exceed 105 days (15 weeks).

If Furnished Holiday Let treatment is lost – then the tax breaks are lost:

- Capital allowances on furniture;
- Capital Gains Tax reliefs – Entrepreneurs Relief in particular;
- Classification as earnings for pension purposes.

If you do not qualify but you previously did then you may elect for the Furnished Holiday Let treatment to continue 2 years after failing to qualify – but you must elect!

If you do not qualify in the 2015/16 tax year – elect on your 2016 Tax Return.
Rent a Room Relief
The amount of Rent a Room Relief is set to rise from £4,250 to £7,500 on 6 April 2016. The exempt amount is halved where the property is jointly owned by two or more individuals.
Further changes affecting Rental Properties
There are lots of changes in the Taxation of Rental Properties going forward. We have compiled a separate newsletter specifically covering this topic so watch out for this.
Capital Allowances
The Annual Investment Allowance (AIA) reduced significantly to £200,000 on 1 January 2016 from £500,000.

Where an accounting year spans this date the AIA’s are time apportioned so you should therefore plan any spending wisely in order to maximise the available relief.
NIC’s Employment Allowance
From 6 April 2014 eligible employers have been entitled to a reduction of up to £2,000 per year in their Class 1 NIC’s and this allowance is increasing to £3,000 from April 2016. This allowance can be claimed through your own payroll software, by using HMRC’s basic PAYE tools online or by using a paper EPS.
Enterprise Investment Schemes (EIS)
Income tax relief is available at up to 30% on investments up to £1,000,000. Any capital gain arising on qualifying shares is exempt. In addition, it may be possible to defer the payment of tax on existing capital gains.

There is a ‘carry back’ facility which allows investors to treat the full cost of the EIS shares as acquired in the previous tax year. Relief is given against that year’s tax liability.

Quick action should be taken if you wish to invest and obtain the necessary EIS3 certificate in time to use carry back for the 2014/15 tax year.
Seed Enterprise Investment Scheme (SEIS)
Income tax relief is available at up to 50% on investments up to £100,000. Any capital gain arising on an eventual disposal of shares held for three years is also exempt provided they have continued to qualify.

Qualifying investors may also benefit from eliminating a capital gains tax liability arising in 2015/16 or 2014/15 (by carry back) by investing in a SEIS. The relief is available on 50% of the qualifying re-invested amount subject to maximum gains of £50,000.

Quick action should be taken if you wish to invest and obtain the necessary SEIS certificate in time to use carry back for the 2014/15 tax year.
Venture Capital Trusts
Receive income tax relief at 30% on investments up to £200,000. The shares must be held for five years. No income tax is payable on dividends from the ordinary shares.

The ability to transfer the holding into a Self-Invested Personal Pension (SIPP) allows for future tax planning possibilities of generating further tax reliefs.
Capital Gains Exemption
Where possible, realise capital gains to use your annual exemption allowance of £11,100 for 2015/16 (£5,550 for most Trusts). Remember that married couples and civil partners can use two annual exemptions by transferring assets pre-sale however further advice should be taken prior to doing this.
Inheritance Tax
With the nil rate band having been frozen at £325,000 since 2009/10 and expected to be unchanged until at least 2017/18 it is important to review inheritance tax planning strategies where you are keen to reduce your IHT liability.

If you can afford to make gifts of capital you should seek to use your £3,000 annual exemption before the end of the tax year. Don’t forget if you didn’t use your annual exemption last year you can also use that too enabling you to make a total IHT free gift of £6,000 (or £12,000 for a couple).

There is also the small gifts exemption which is often overlooked, where an individual can give away up to £250 to as many individuals as they wish in any tax year free of IHT. However, it is not possible to use both the £3,000 annual exemption and the £250 annual exemption in respect of gifts to the same individual in the year.

Further exemptions are available also. If you are concerned about your potential Inheritance Tax position, you may wish to get further advice.
Also remember:
- The National living wage is applicable from April 2016.
- Advisory Fuel Rates for Company Cars – New Rates introduced from 1 March 2016.
- Scottish Rate of Income Tax comes into force on 6 April 2016.
- The tax treatment for Non Domiciled individuals is due to change from 6 April 2017.

Need more helpwith your tax planning?

Get in touch