February signifies the start of a two-month rush to make sure any tax year planning opportunities are covered.

The final couple of weeks of the tax year can become a minefield and it is essential to start early to avoid missing the deadline.

Many of the allowances and limits which we are permitted each year are lost if they’re not used, which can then create a potential tax liability.  A few key areas are:

Pension contributions. 

The 5^th April is the last day in which individuals can make pension payments.  For higher rate taxpayers the next few weeks offer an invaluable opportunity to maximise their tax relief by topping up their pensions.

For those on lower incomes, and possibly receiving working tax credits, a pension contribution before the tax year end could give them tax relief and increase their working tax credits in the new tax year.

Small Gifts and Inheritance Tax.

Every year a person can make a gift of £3000 and it will be exempt from inheritance tax.  You can also use the last tax years allowance if unused.

For example, an elderly couple could give £12000 to their children using the current and past years allowance.  This would immediately reduce their estate and save up to 40% inheritance tax.

Capital Gains Tax.

Almost without fail, every year, people do not maximise their capital gains tax allowances.  Every person can generate £10600 in capital gains (profit) in the tax year and pay no tax at all.  Once the tax year has gone this years allowance will be lost.

ISAs

Individual Savings Accounts are one of the most well known savings vehicles yet every year many of us do not maximise our savings.  The ISA is well known for its tax efficiency in that any monies taken out of the ISA are tax-free. 

The ISA can accept up to £10680 each tax year and can hold a combination of cash or bank deposits and/or stocks and shares.  You can even set up a Junior ISA for children following the change in rules this year. 

If the allowance isn’t used it is lost come the advent of the new tax year when limits are reset.

The above are just a few of the key areas we ask our clients to consider.  If you would like to discuss your plans for this tax year and look at the opportunities available please get in touch.