As the new tax year is upon us, why not take time to re-appraise your financial position. By making some simple changes your financial position could be significantly enhanced. With the new higher rate of income tax and low interest rates, it is time to take action to make sure your financial planning meets your objectives.
Our top 10 tips are listed below;
1) Make use of your ISA allowances
If you are fortunate enough to have savings it is important to make sure that you do not pay unnecessary tax on the interest. The Cash ISA allowance has now been increased to £5,100.
2) Make full use of personal allowances
Your personal allowance will depend on your age and income but if you are not using all of your personal allowance consider whether income producing assets can be transferred from your spouse.
3) Consider ownership of income producing assets
If your spouse pays tax at lower rate than you it might be worth moving income producing assets into their name.
4) Protect your personal allowance
If you have taxable income over £100,000 your personal allowance will be reduced by £1 for every £2 in excess of £100,000 until it is completely eroded. The personal allowance could be reinstated by making pension contributions or by sacrificing salary in favour of other benefits.
5) Look at your protection arrangements
Life cover is one of the few things that have got cheaper over the years. If you have old life policies it may be worth seeing if these can be replaced with cheaper cover. This would not be advisable though if your health has deteriorated. It is also important to also make sure that your cover is sufficient and the term remains appropriate.
6) Put life cover in trust
If your life cover is not written under a trust it will form part of your estate and may therefore be taxable on death. Furthermore your beneficiaries will not get the proceeds until probate has been granted.
7) Claim gift aid
If you are a higher rate taxpayer and have made gifts to charities you can claim tax relief at the rate of 20%
8 ) Set mortgage interest against rental income
If you have a buy to let mortgage interest can be offset against your rental income for tax purposes. It is therefore best to secure debt against your rental property rather than your main residence although what matters is the purpose of the borrowing.
9) Consider repaying Mortgage Debt
With savings rates at all time lows it might make more sense to use savings to repay mortgage debt, particularly if you are on an uncompetitive fixed rate. Watch out for early repayment charges.
10) Make a Will
The laws of intestacy are complex and are unlikely to result in the best outcome for those you would want to benefit on your death. Having a valid and appropriate will in place is vital.
By David Anderson – Chartered Financial Planner @ Concept Financial Planning Ltd