For many tax advisors January is one of the busiest times of the year having to deal with the personal tax filing deadline of 31 January. With under a week to go HMRC estimated that just over 3million returns were still to be filed, representing around 27% of all returns expected. With so much to do it can be easy for individuals to focus on meeting filing deadlines and to forget about planning opportunities for the current year.
With two months of the tax year left to go it is well worth considering whether you have made full use of all available allowances, while there is still time to implement changes, for the current year and also look ahead to consider any planning for changes being implemented from April 2018.
What should I be considering?
1. Have I made full use of the £5,000 dividend 0% band? It is worth noting this is due to decrease to £2,000 from April 2018, increasing the tax liability for those with dividend income in excess of this amount.
2. For married couples or civil partners where one spouse earns below the personal allowance (£11,500) and the other is not a higher rate tax payer, have you made an election to transfer 10% of your personal allowance?
3. For those with investments have you made full use of your personal ISA allowance, currently £20,000 per annum?
4. Everyone has a capital gains tax annual allowance of £11,300. If you have an investment portfolio has full use been made of this allowance?
5. For landlords the past few years have seen a number of changes, perhaps the biggest impact is the restriction of interest relief that came into effect in April 2017. Since April 2017, interest is no longer a wholly allowable expense; instead tax relief is given as a 20% tax credit of the interest paid.
Currently 25% of the interest expense is used for the 20% tax credit, with 75% being deducted against the gross rental income. Whereas from April 2018 this increases to 50%. For a higher rate taxpayer with £10,000 of interest, this represents an increased tax charge of £500.
Given the changes in relief it is worth reviewing borrowings and operating structure.
6. Finally, have you made full use of your pension allowances, although the reliefs available have become more complex over the last few years, in general everyone could invest up to £40,000 into a pension, with unused allowances carried forward up to 3 years.
By Partner, Mark Tibbert
For further information on any of the above or a review of your tax affairs, please do not hesitiate to contact me