Year end planning
Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years. This is generally the difference between the old £50,000 limit and the pension input each year and can be added to your relief for 2014/15. Note that the annual pension allowance is £40,000 from 6 April 2014.
For example if your pension input was £20,000 in the 2011/12 tax year, then there is potentially up to £30,000 unused relief from that year available to add to your £40,000 2014/15 pension allowance. You would need to make gross pension contributions of at least £70,000 (£40,000 plus £30,000) to avoid losing this generous relief.
AVOID LOSING YOUR PERSONAL ALLOWANCE
For every £2 that your adjusted net income exceeds £100,000, the £10,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.
GET READY FOR THE NEW FLEXIBLE PENSION RULES
For those aged 55 and over and with a SIPP or other money purchase schemes, the new flexible pension rules commence on 6 April 2015. The new rules allow such pensioners to withdraw as much or as little income as they like from their fund but the income drawn will be taxed at their marginal tax rate.
Those affected should discuss the options with an Independent Financial Adviser who will need to work closely with us as the tax payable on the pension will depend upon their level of other income.
MAKE CHARITABLE PAYMENTS UNDER GIFT AID TO SAVE MORE TAX
Higher rate taxpayers should make any charitable payments under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC.
YEAR END CAPITAL GAINS TAX PLANNING
Have you used your 2014/15 annual exemption of £11,000? Consider selling shares where the gain is less than £11,000 before 6 April 2015. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.
TAKE ADVANTAGE OF YOUR 2014/15 ISA ALLOWANCES
Your maximum annual investment in ISAs for 2014/15 is £15,000. Your investment needs to be made before 6 April 2015. In addition, have you thought about investing for your children or grandchildren by setting up junior ISAs or pensions? In the 2014/15 tax year, you can invest £4,000 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.
INHERITANCE TAX PLANNING BEFORE 6 APRIL 2015
Have you made use of your annual inheritance tax exemptions? The general annual exemption is £3,000 per donor (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.