Pre Year End Tax Planning

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With the tax year end less than a month away, now is the time to review your tax affairs to ensure that you are making the most of the tax allowances and reliefs that may be available. The following highlights some of those reliefs and allowances:

PENSION PREMIUMS

The annual allowance for 2013/14 is £50,000 and the annual allowance will reduce for 2014/15 to £40,000. In order to claim relief for 2013/14, the premium must be actually paid to the pension provider before 5 April 2014. In addition, in order to utilise any unused pension relief from 2010/11 under the carry forward rules, a further premium must also be paid before 5 April 2014. Relief is available at your top tax rate (potentially 45%) for premiums paid. The lifetime allowance also reduces from 5 April 2014 although the previous limit can be protected by way of an election. You should review your pension savings in the light of the above before 5 April 2014.

INDIVIDUAL SAVINGS ACCOUNTS (ISAs)

The ISA allowance for 2013/14 is £11,520 of which £5,760 can be invested in cash. To utilise this year’s allowance, the subscription must be paid by 5 April 2014.

CAPITAL GAINS TAX ANNUAL EXEMPT AMOUNT (AEA)

The AEA for 2013/14 is £10,900 and gains up to this amount can be made tax free. Any unused amount cannot be carried forward.

TAX EFFICIENT INVESTMENTS

The following all have annual investment limits:

Enterprise Investment Scheme (EIS) - £1,000,000 with relief at 30%
Seed Enterprise Investment Scheme (SEIS) - £100,000 with relief at 50%
Venture Capital Trust (VCT) - £200,000 with relief at 30%
Business Property Renovation Allowance - Limits per project with relief at 100%

All of these are an annual relief (with possible carry back for EIS and SEIS) so payments should be made before 5 April to benefit from the relief available. Capital gains can also be deferred or sheltered by EIS/SEIS investments.

MANAGING YOUR TAX RATE

The Personal Tax Allowance of £9,440 is phased out for those with income above £100,000 and if your income exceeds £118,880, no allowance is due at all. For those with income between £100,000 and £118,880, the effective marginal tax rate is 60%. Income can be reduced with the payment of pension contributions or charitable gift aid donations, thus increasing the rate of relief.

The additional rate of tax of 45% is payable on income in excess of £150,000. If your spouse or civil partner pays tax at a lower rate, there is scope for transferring income producing assets to them so that they pay tax at a lower rate on the income that they produce.

REMITTANCE BASIS TAXPAYERS

The remittance basis is an annual election and a review should be undertaken of the benefit of a claim in the year. This benefit can be maximised by realising income or gains in a year when the election has been made, rather than in the following year, where, maybe, the election may not be required.

FURTHER INFORMATION

This note reflects the current law (5 March 2014) and is general in nature and does not cover every matter that might be relevant to you. If you wish to discuss your own position in more detail, please call your usual Throgmorton contact. Investment advice should be taken where relevant.

For further information please contact Rob Menhenitt on +44 (0)118 939 3200.

Rob Menhenitt
6 March 2014 



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The information in this notice is intended for general guidance only. Throgmorton does not accept any responsibility for losses incurred to any person acting or refraining to act as a result of the information in this notice. Advice should be taken in the context of specific circumstances.


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