Pre Year End Tax Tips

The end of the tax year is fast approaching.  Have you considered if you need to take any action before the deadline of 5 April 2009 to make sure you don’t miss out on tax saving opportunities?

• Pensions – The amount you can pay into a pension is based on earnings in the tax year and after the year has ended the allowance is lost. To use the allowance for 2008/09 the pension contribution needs to be paid by 5 April 2009.  If you pay into a pension through your company, the company will get tax relief on this at 21% in the year to 31 March 2009, but will get tax relief at 22% in the year to 31 March 2010.

• ISAs – Make use of your ISA allowance. This is £7,200 for 2008/09. Unused allowances will be lost if they are not used.

• Dividends - could you take a dividend from your company to make sure you maximise your income within the basic rate tax band?   If you have paid yourself a tax-free salary of £5,435 this tax year, then the maximum net cash dividend you can take is £31,800 free of personal income tax. (This assumes that you do not have any other personal income).

• Personal income – if you have income from investments consider splitting the investment with your spouse to maximise use of both your basic rate tax bands.

• Child Trust Fund – Parents and relatives of children born after 31 August 2002 can add up to £1,200 per tax year to the child’s Trust fund account.  Any income or gains are tax free.

• Inheritance tax – Consider making lifetime gifts to reduce your estate on death. There is also an annual exemption amount of £3,000 which can be given away each tax year.  If not used it can only be carried forward for one year before it is lost.

• Charity donations – If you are a higher rate tax payer you can get tax relief on donations to registered charities. To claim the relief for 2008/09 the gift must be made before 5 April 2009.  Make sure you have signed a gift aid declaration form provided by the charity.

Please call your usual contact at K&H if you need more information on any of these areas.