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End of year tax planning
Pension for 2017/18
You are allowed to make a contribution of up to £40,000 (gross) to a pension scheme. This can be an employer’s contribution, personal, or a combination of both. Unused allowances from the previous 3 tax years can be brought forward.
For personal contributions tax relief is capped based on your relevant earnings in the current tax year. This is not the case for employer contributions and these would qualify for Corporation Tax relief.
ISA allowance – use it or lose it!
For 2017/18 your allowance is £20,000 and can be made into a Stocks and Shares or a Cash ISA or a combination of the two. Children have an ISA allowance of up to £4,128 for 2017/18.
Allowances cannot be carried forward.
Gifts of up to £3,000 are permitted per year without attracting inheritance tax, this annual allowance can be carried forward, therefore, if you did not use it last tax year (2016/17) you can make a gift of up to £6,000.
Any gifts in excess of this allowance can be subject to inheritance tax if you do not survive seven years from the date of the gift.
Capital Gains Tax
The annual exemption for 2017/18 is £11,300. Use it or lose it, as it cannot be carried forward. A transfer of assets between spouses/civil partners, should be considered to ensure that tax on any gain above the allowance is potentially at a more favourable rate of 10% rather than 20%, which is subject to income tax rates applying to the individual.
This could be considered to extend your basic rate tax band.
Venture Capital Trusts (VCT), Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS)
These arrangements can reduce your income tax liability by up to 30% of the amount you invest into a VCT and EIS and 50% for SEIS. Limits apply to these arrangements and you can carry back to 2016/17 if you do not use your full allowance for that tax year.
Please be aware that these arrangements are considered high risk as they are designed to help small companies to raise capital.