Act by 6 April to take advantage of the legitimate tax reliefs and allowances that the government offers to help us take responsibility for our financial futures and that are part and parcel of sound financial planning.
Most people recognise the importance of paying their fair share of tax. After all, it helps fund the NHS, schools and all the other vital services that the state provides. Yet it is equally important to optimise our finances and use the various allowances and tax incentives the government offers.
With the end of the tax year fast approaching, here is a simple, practical check list that could help you optimise the amount of tax you pay in the 2017/18 tax year – and possibly for many years ahead. To be effective for the current tax year, you need to take action before 6 April.
Reducing income tax
This is particularly important for people with income of £50,000 – £60,000 and who could lose child benefit.
- Are you on the right tax code? Even a small change in your circumstances can affect it.
- Have you included charitable donations on your tax return and, if you pay higher rate tax, reclaimed it on gift aid donations?
- Could you contribute more to your pension without going over your annual contribution and lifetime allowance limits?
- Might it make sense to transfer some income-producing assets to your spouse or partner, or vice versa, if one of you does not use your full personal allowance or pays a higher rate of tax?
Use or lose annual allowances
Using your annual allowances each year can help you shelter as much money as possible from tax in the future.
- Have you and your family made the most of your ISA allowances? The annual subscription limit is £20,000 for the 2017/18 tax year.
- Would you like to help your children or grandchildren financially? If so, you could consider paying in to a Lifetime ISA (LISA) on their behalf.
- You could also pay money into your spouse’s or children’s pensions. Although you won’t receive any tax benefits, the person receiving the contribution can, depending on how much they receive, get income tax relief.
- If you have some money to spare and are concerned that you might leave your family with an inheritance bill to pay when you pass away, you might want to give away small amounts of money each tax year, subject to certain limits and conditions.
As ever, there are pros and cons to these suggestions and it is important to understand the full implications of what you are considering. It therefore makes sense to talk to one of our professional financial advisers before you act. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.