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Kirk Rice Blog

Tax Reliefs 2019-2020 – Don’t Miss OutWritten on May 16, 2019 by Kirk Rice LLP

Tax Reliefs 2019-2020 –  Don’t Miss Out
Taxing Times Questions

The Question:

In the past I have often left it too late to make use of available tax reliefs and exemptions, and have ended up paying more tax than I perhaps needed to. What reliefs should I make use of in the year ahead and what should I do differently?

Kirk Rice LLP answers:

Time has a habit of slipping away and human nature being what it is, we will often end up either doing something last-minute, or not at all. The former approach may mean that we rush into something that has been ill-considered, whereas the latter may leave us missing out entirely and kicking ourselves for having been so lazy. So it is important to take the time to consider what tax reliefs you can benefit from.

To answer the second half of your question first, you should start planning ahead now for 2019-20. Part of the process should involve getting your self assessment tax return for the previous year (2018-19) prepared and filed with HMRC as soon as possible, so that you can set aside funds to meet your tax bill (due for payment by 31 January 2020). Preparing your tax return early will give you the opportunity to identify what you should have done last year, and avoid repeating the same mistake in the year ahead.

As for available tax reliefs, there are some that incentivise and reward you both now and in the future (such as saving towards your pension), some that incentivise you to invest in new business initiatives (EIS, VCT and SEIS), and some that reward philanthropy (donations to UK registered charities). The tax reliefs available can be generous and for higher rate and additional rate tax payers in particular, can result in significant tax savings.

Exemptions and allowances are, for the most part, available to all (with some notable exceptions) and exempt from the charge to tax either a proportion of income, or a proportion of capital gains realised in the year. A further raft of exemptions apply for inheritance tax purposes. Below is a list of a few of the exemptions available:

Personal Allowance: The first £12,500 of income is tax-free, although this tapers away once your total income exceeds £100,000. Once income has reached £125,000 this will have disappeared altogether. The effective rate of tax between these two thresholds is 60%. The tax reliefs mentioned above should be considered to limit the loss of your Personal Allowance.

Where a couple are married or in a civil partnership, and one person has income below the Personal Allowance, they will be able to transfer up to £1,250 of their allowance to their spouse or civil partner provided that person, as the higher earner, is a basic rate taxpayer. This represents a potential tax saving of £250.

Annual Exemption: The first £12,000 of chargeable gains will be exempt from capital gains tax. To get the benefit of two lots of Annual Exemption, married couples and those in civil partnership should consider a transfer of assets between themselves (normally at a no gain/no loss) prior to any sale being made, or perhaps selling some shares (for example) either side of the tax year end.

Gift Exemption: You may gift up to £3,000 to one person in the tax year and that gift will fall completely out of your estate for inheritance tax purposes. If you have not used your gift exemption in the previous year (so 2018-19) then you may make a further gift of up to £3,000 to one person in the current year to use up the previous year’s allowance. Certain levels of gifts in consideration of marriage are also available, dependent upon your relationship to the couple getting married. There is also the Small Gifts Exemption of up to £250 for gifts made to any number of people in the tax year.

There are of course other tax reliefs and exemptions available, and some involve investment risks, have qualifying conditions attached, or require in-depth planning, so professional advice should be sought. If you would like to discuss these, please contact the Kirk Rice LLP team. We will be happy to help.

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ENTERPRISE INVESTMENT SCHEME

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TAXATION OF THE FAMILY

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Any reader interested in discussing the whether you would be able to access some of these tax reliefs can email info@kirkrice.co.uk to arrange a call with one of our tax specialists.

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future.

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