The tax year will end on April 5th. Are you confident that you have made appropriate preparations and maximised your tax allowances?
Here are some of the allowances that you should consider:
The Marriage Allowance
You can transfer £1,250 of your Personal Allowance to your spouse or civil partner if they earn more than you and pay tax at the basic rate. This could yield a potential tax saving of £250. You need to make sure that you have income within your Personal Allowance of £12,500. An application to HMRC needs to be made for this allowance. It’s also worth noting that you can backdate your claim to include any tax year since April 5th 2015.
Enterprise Investment Scheme, SEIS and VCT
Investments made with the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) during the current tax year can be carried back for relief for the 2018/2019 tax year, potentially providing both income tax relief and capital gains tax deferral relief. However, rules differ between the two so be sure to check with each provider.
For the EIS, you can obtain 30% income tax relief on the amount allocated for shares in EIS qualifying companies, from a minimum of £500 up to a maximum of £2,000,000. For Venture Capital Trusts (VCT), you receive 30% of tax relief on investments up to £200,000. For SEIS qualifying companies, you can receive 50% income tax relief on up to £100,000 per year.
The Tapered Annual Allowance
For higher income earners, the tapered annual allowance will apply. For every £2 of adjusted income, including employer pension contributions, as well as income over £150,000, your annual allowance is reduced by £1. The Government has a comprehensive guide for working out whether your income will have the allowance applied. You may only be able to assess this accurately as you get closer to April 5th. If you can assess the figures accurately in time to make a pension contribution, then ensure you do so. If not, as soon as the most accurate figures become available, you can take steps to make up any shortfall by carrying it forward to the next year.
The Money Purchase Annual Allowance
You can get tax relief on pension contributions of up to £40,000 per year or 100% of your taxable salary. However, if you have already started drawing income from a defined contribution pension scheme, the amount you can pay into a pension without suffering a tax charge reduces.
The allowance for the 2019/2020 tax year remains unchanged from last year at £4,000 and applies if you have taken any taxed income from a money purchase or defined contribution pension. This extends to personal pensions, SIPPs and workplace pensions.
If you’re an employee, you may be able to claim for expenses not reimbursed by your employer, such as travel mileage (not including home to work), the cost of buying small essential items or equipment needed to do your job, such as tools or professional subscriptions.
If your employer reimburses you at a rate lower than the current standard mileage rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter, you can claim the difference back in your tax return.
Taking the time now to make sure you’re maximising your allowances can yield notable tax savings at the end of the tax year on April 5th.