The end of the Tax Year

There are many matters which taxpayers need to consider shortly before 5 April each year and also many others shortly after 5 April which then effect the subsequent year. Some of these are as follows:

ISAs

Anyone who is a taxpayer and particularly those who are higher rate tax payers should seriously consider ensuring that they use their full annual investment allowance into an individual savings account (ISA).

The maximum allowance for 2013/14 is £11,520 of which up to £5,760 can be deposited into a cash ISA.

To be able to subscribe for an ISA you must be 18 or over and resident in the UK. Note however that ‘Junior ISAs’ (which allow cash investments and investments in stocks and shares up to a maximum of £3,720) are available to those aged under 18 and cash ISAs can be opened by those aged 16 or 17.

Gift Aid Payments

Don’t forget that, in respect of the 2013/14 tax year, higher rate taxpayers can claim an extra 20% of the ‘grossed up’ donation from H M Revenue & Customs (HMRC) for donations made during the tax year. For example, if a donation of £80 is made to charity under gift aid during the year, the higher rate tax relief that HMRC will give you will be 20% of £100 i.e. an additional £20. For additional rate taxpayers (those with taxable income above £150,000 for the year), the extra relief would be £25.

It may also be possible to ‘back-date’ gift aid payments to the previous tax year, which may be beneficial depending on the level of one’s taxable income for the previous year compared to the current year. For example, a donation made in the year ended 5 April 2014 could be treated as if it had been paid in 2012/13  to obtain any additional tax relief in that year.

It is a good idea to keep a record of the gift aid donations you make during the year as you go along since it is very easy, come the end of the year, to forget all those family members and friends that you have sponsored to do silly things or run the Bath Half Marathon for example, all in the name of charity!

Pension Schemes

If you regularly make contributions to pension schemes, you may wish to consider a one off additional payment to be made before 5 April 2014 particularly if your total income for the current year may take you into the 40% income tax rate.  For most individuals that is at a level of income including interest from savings, etc, of about £41,500.

If you make employee contributions to your employer’s scheme and your total taxable income is likely to exceed the higher rate threshold, then, unless the contributions are dealt with under the net pay arrangement, do not forget that you will need to make a claim for any additional higher rate tax relief as this is not given automatically. It may be included as an adjustment in your tax code, or may be claimed via a Self Assessment Tax Return.

Inheritance Tax

If you wish to make use of the annual inheritance tax gifts allowance, up to £3,000 can be given in total to all recipients for the year ended 5 April 2014 and if that allowance was not used for the year ended 5 April 2013, that can also be utilised for gifts now, ie up to £6,000 could be gifted if there have been no earlier gifts in the last two years. This could save up to £2,400 of inheritance tax.

In addition, small gifts up to £250 to each of as many individuals as the donor wishes to benefit can also be made. This allowance cannot be used to cover part of a gift or gifts totalling more than £250 to the same individual during the same tax year.

The above are only a small selection of some of the tax planning points at this time of the year and we do have a publication, Financial Perspectives – End of Tax Year Guide Spring 2014 available to anyone who would like to telephone our offices or e-mail us at mail@pearsonmay.co.uk. Copies of this will be provided free of charge.

The above is for general guidance only and no action should be taken without obtaining specific advice