News
March 2010
Preparing for the 50% tax rate
The current tax year ends on 5 April, and the new 2010/11 tax year sees the introduction of the new 50% tax rate on incomes above £150,000, as well as the removal of personal allowances for some.
This makes year-end tax planning more important than ever, and it is likely that taxpayers will be looking to make use of some of the following opportunities:
Investment Ideas:
- ISAs – All taxpayers can invest up to £7,200 tax-free, rising to £10,200 for the over-50s (the new limits will be extended to everyone next tax year).
- Pensions – It may be possible to increase pension contributions – although new limits to the tax relief on those are also being brought in (see below).
- Investment opportunities - Review current structure and possibly consider Enterprise Investment Schemes or Venture Capital Trusts with tax breaks of 20% and 30% respectively
Tax Planning Ideas:
- Capital Gains – Gains of up to £10,100 per year are allowed tax-free so it may be worth looking to crystallise some gains now. For gains above that limit, the tax rate is 18%, but given the large gap between that and the highest rate of Income Tax, many commentators expect it to increase soon – so it may even be worth taking gains above the £10,100 limit now, while tax rates are relatively low.
- Investments – Consider realising investments, bond gains or closing deposit accounts to crystallise interest.
- Inter-Spouse Transfers – If one spouse pays tax at a higher rate than the other, it may be worth transferring assets to make the most of Capital Gains Tax and Income Tax rates and allowances.
- Inheritance Tax – Anyone can give away gifts of up to £3,000 in each tax year, together with any number of small gifts of up to £250 each, without being subject to Inheritance Tax.
- Payment of dividends or bonuses – Consider advancing them before 5 April 2010 if possible
- Accounting dates - Review if there is any benefit in a changing the dates to use overlap relief, or incorporation.
To discuss any of these points further please contact us.
