End of year tax planning

With the end of the current tax year on 5th April 2017 approaching fast, our thoughts turn to pre end of year tax planning considerations.

For those who operate their business via a limited company, this may include profit extraction aspects such as the payment of dividends to utilise the £5,000 dividend allowance that was introduced for individuals on 6th April 2016, the payment of interest on loans made by the directors to the company to utilise the personal savings allowance that was also introduced on 6th April 2016 (£1,000 allowance for basic rate taxpayers, £500 allowance for higher rate taxpayers, no savings allowance available to additional rate taxpayers) and the possibility of the company making employer pension contributions. This is also a good time to review profit extraction methods for the coming tax year.

For both incorporated and unincorporated businesses with accounting periods ending in the next few months the timing of any planned capital expenditure and the availability of capital allowances thereon may require detailed consideration in order to ensure that relief is obtained in the most beneficial tax period.

For individuals, tax planning may also involve considerations such as:

• Capital gains tax planning to make use of annual exemptions or to crystallise capital losses for use against gains.
• Inheritance tax planning via the making of gifts from income, up to a total of £3000 per tax year, to utilise the Inheritance Tax annual exemption. Any unused Inheritance Tax annual exemption from the 2015/16 tax year may also be utilised prior to 5th April 2017.
• Income tax planning such as the making of personal pension contributions to reduce tax liabilities or utilise pension allowances, the timing of tax efficient investments such as EIS and SEIS investments and the availability of tax relief thereon in respect of both income tax and capital taxes, the use or preservation of personal income tax allowances, the availability of marriage allowance to transfer some of the unused personal allowance from one spouse/civil partner to another and the use of tax efficient savings allowances such as ISAs.
• New restrictions in respect of the tax relief available for interest and other finance charges incurred in respect of the letting of residential properties will commence from 6th April 2017. Any residential landlords who have not already considered the impact that these restrictions will have on their tax position should review this urgently as the new rules could result in a significant increase in tax liabilities and forward planning may be required to help mitigate the impact.

This article provides a general outline of some of the issues that may require consideration prior to the end of the tax year and is not exhaustive. Professional advice should always be sought based on personal circumstances. For advice or assistance with any tax planning matter please contact Lynn Miller at Rennie Welch LLP either by email at lynn.miller@renniewelch.co.uk or by telephone on 01573 224391.