Tax Saving Tips 2019

February 2019
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The period up to the end of the tax year, of 5th April, is an ideal time to consider whether you are as tax efficient as you could be. Here are our top tips:

  1. Review the income you expect to receive in this tax year. Is it as tax efficient as it could be? For income from shares, not in an ISA, £2,000 of dividends are tax free. See our blog 'Shareholders Set To Receive Record Dividends' for further information. Tax due on the excess earned in 2017/18 must be paid by 31st January.
     
  2. Interest paid on deposit accounts, from gilts and corporate bonds is tax free for the first £1,000 for basic rate taxpayers, £500 for higher rate taxpayers. Top rate taxpayers, with taxable income over £150,000, get no allowance. Interest above this is taxable.

    Tax is no longer deducted at source on these savings, so taxpayers must pay via self-assessment, see our blog post 'Are You Owed or Do You Owe?’.

    Nil rate taxpayers need no longer pay tax at source on their savings accounts, if tax was deducted from earlier years savings income, you need to act before 5th April to claim back for the years 2014/15 to 2015/16. Claims can only be backdated for 4 years.
     
  3. Review your capital gains and losses. The tax free allowance of £11,700 has to be used by 5th April or is lost. From 6th April the allowance will be £12,000. Realizing gains and losses each year can reduce the total tax payable on the growth in value.

    Spouses / civil partners may change ownership of assets between them CGT free and in this way double up the tax free allowance. Capital gains are taxed at 10% or 20% for basic and higher rate or top rate taxpayers. The rate applicable to residential property remains at 18% and 28%. Take a look at our previous blog post 'Independent Taxation Part 2'.
     
  4. Use your allowance for tax free ISA saving. Adults can add up to £20,000 each before and after 5th April 2019. Under 18s can save £4,260 this tax year. 16-17 year olds can invest £24,260 if they open a cash ISA alongside their Junior ISA. See our blog post 'Cash or Stocks & Shares ISA - Which Is Right For You?'.

    18 to 40 year olds, who wish to buy their first property, may invest £4,000 of their ISA allowance in a Lifetime ISA. It attracts a Government bonus of 25%, so long as the money is used to buy their first home or, if not, invested till age 60. Penalties apply if accessed for any other purpose.

    If you are willing to invest for the longer term and to risk loss of capital, investing in a Venture Capital Trust or Enterprise Investment Scheme may be tax efficient. Income tax relief at 30% is granted on the investment, which can also be used to shelter capital gains and VCTs may pay any dividends tax free.
     
  5. Review your pension savings. Tax relief on pension savings of up to £40,000 p.a. is granted at your highest income tax rate. Relief not claimed can also be carried forward for up to 3 years after the end of the tax year but drops off each 5th April.

    Once taxable income is more than £110,000, a reduced allowance between £10,000 and £40,000, may apply. If so, using up earlier years' relief before 5th April will be even more important.

    It is also reduced to £4,000 per year if you have flexibly accessed a private pension and withdrawn more than the tax free cash (small pots excluded).
     
  6. Adults living with children under 16, or age 20, if still in education, receive child benefit, a tax free benefit unless one of them has income of £50,099 or more. Making pension contributions and charitable gifts can restore eligibility for this. Our blog post 'Parents Can Eliminate Child Benefit Tax’ and 'Making Gifts to Charity More Valuable' explain how.
     
  7. Once taxable income is over £100,000 the personal allowance is reduced. Making pension contributions or gift aid donations may restore some personal allowance. This gives an effective rate of relief of 60%, making retirement saving and charitable giving more affordable.
     
  8. If you have larger pension funds built up, consider applying for a protected lifetime allowance.

    The lifetime allowance is now £1,030,000. From 6th April 2019 this will increase to £1,054,000. Funds withdrawn in excess of this, when you start to draw your cash or pension, or have excess funds on death before age 75, or on reaching 75, create additional tax charges on the excess. There is lifetime allowance protection you may be eligible for to reduce the impact of this tax.
     
  9. Married couples / civil partners, where one is a nil rate taxpayer and the other is a basic rate taxpayer (see table) may elect to transfer 10% of the personal allowance from the nil rate to the basic rate taxpayer. For 2018/19 this saves £238 and £250 next year. A claim for all 4 years made before 5th April would pay out £900. This is covered in more detail in our 'Get The Taxman To Pay For Christmas' blog post.
     
  10. Collect all papers relating to your taxable income, interest and dividend statements, P60, capital gains etc and review this in June. Completing your tax return then may mean you can reduce any tax payments due on 31st July, claim any reliefs due and avoid the stress and possible fines of filing your return in January.

Taxable Income Thresholds UK excluding Scotland

Taxable Income

2017/18

£

2018/19

£

Personal Allowance

11,500

11,850

Starting Rate 0%

5,000*

5,000*

Basic Rate 20%

11,500 – 44,999*₁

11,850 – 46,350

Higher Rate 40%

45,000 – 149,999*₂

46,350 – 149,999

Top Rate 45%

150,000 plus

150,000 plus

Kay Ingram
Director of Public Policy, LEBC

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment or product for your circumstances, please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. The Financial Conduct Authority does not regulate tax planning. Tax rates and allowances may change in future and depend on individual circumstances. 

*Where earned income does not exceed this allowance up to £5,000 of savings income is taxed at the starting rate of 0%. (not Scotland )
*1 Residents of Scotland £43,430 at 19%, 20% and 21%
*2 Residents of Scotland £43,430 to £149,999 at 41% and 46% over £150,000. See our blog post Triple Whammy for Scots Taxpayers

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