News: March 2014

Year end planning

Pension planning

Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years. This is generally the difference between £50,000 and the pension input each year and can be added to your relief for 2013/14. Note that the annual pension allowance reduces to £40,000 from 6 April 2014.

From 6 April 2014, the lifetime pension allowance, which determines the amount you could save into pensions and receive tax relief will be reduced to £1.25 million. Apply for fixed protection before 6 April 2014 to continue to benefit from the current £1.5 million lifetime allowance.

ISA allowances and other tax efficient investments

Your maximum annual investment in ISAs for 2013/14 is £11,520 (up to £5,760 of which can be saved in a cash ISA). Your investment needs to be made before 6 April 2014. In addition have you thought about investing for your children or grandchildren by setting up a Junior ISAs or pensions? In the 2013/14 tax year, you can invest £3,720 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS), which offers income tax relief of 30 per cent as well as capital gains tax relief? An even more generous tax break is available for investment in A qualifying Seed EIS company where income tax relief at 50 per cent is available, together with a capital gains tax exemption on disposal and the ability to shelter 50% of your capital gains in 2013/14. A 30% income tax break is also available by investing in a Venture Capital Trust.

Inheritance tax

Have you made use of your annual inheritance Tax exemptions? The general annual exemption is £3,000 per donor (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.

Capital expenditure

Those running a business should take advantage of the temporary increase in the Annual Investment Allowance (AIA) to £250,000. 5th April 2014 is not relevant for this tax break as the limit continues until 31 December 2014, although there are complex transitional rules. AIA provides a 100% tax write off for plant and equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems.

Capital gains tax

Have you used your 2013/14 annual exemption of £10,900? Consider selling shares where the gain is less than £10,900 before 6 April 2014. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.

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