Tax planning tips for the year end

22nd March 2017

The end of the tax year is fast approaching, but it is not yet too late to make the most of some of the tax-saving opportunities available to you and your business.

 

Business

Capital allowances

You might want to review your capital expenditure to maximise claims for capital allowances. Since 1 January 2016 the majority of businesses have been able to claim a 100% Annual Investment Allowance on the first £200,000 of expenditure on most types of plant and machinery, except cars (transitional rules apply).

Please contact us before investing in plant and machinery as we can help to ensure you receive the maximum tax benefit from your purchase.

Business motoring

It may well be worth carrying out a review of your company car policy, as year on year the percentages and therefore the taxable benefits on cars are increasing. It could prove more beneficial to pay employees for business mileage in their own vehicles at the statutory mileage rates, especially if their business mileage is high.

We can assist you in reviewing your company car policy and help you decide on the most tax-efficient way to organise your business motoring.

 

Individuals

2016/17 ISA allowance

Individuals can invest in any combination of cash or stocks and shares up to the overall annual subscription limit of £15,240 in 2016/17. However, a saver may only pay into a maximum of one Cash ISA, one Innovative Finance ISA and one Stocks and Shares ISA each year.

Increased flexibilities introduced from 6 April 2016 allow individuals to replace cash they have previously withdrawn from their ISA earlier in a tax year, without this payment affecting a saver’s annual subscription limit. Investments for the 2016/17 tax year must be made by 5 April 2017.

60% ‘hidden’ tax rate

You will already be paying tax at 40% if your income exceeds £100,000 – however, your personal allowances are also clawed back by £1 for every £2 by which your adjusted net income exceeds £100,000.

This means that an individual with adjusted net income of £122,000 or more will not be entitled to any personal allowance, resulting in an effective tax rate on this slice of income of 60%!

If your income for 2016/17 is likely to fall within this band, you may want to consider strategies such as deferring some of your income, or increasing your pension payments to reduce your taxable income – please talk to us first about your particular circumstances.

Timing is crucial when planning for the year end. Please contact us for advice on the tax-saving strategies that may be available to you.

(Usual ABG disclaimers apply.  Always speak to a professional before acting or refraining to act upon anything mentioned in this article)