Are you making the most of tax planning opportunities? Part 3 – Other ways to reduce your tax liabilities

Our first two blogs focused on allowances and tax efficient investments. In our final blog, we’re looking at the other ways you can reduce your tax liabilities.

Child Benefit

Child benefit is gradually withdrawn where an individual’s taxable income (or the taxable income of a co-habiting spouse/partner) exceeds £50,000. Once income reaches £60,000 the child benefit received is withdrawn completely.

Converting salary into a tax free benefit (such as child care vouchers) or making additional pension contributions or charitable donations can reduce your income keeping it below the £50,000 threshold.

Capital Gains Tax

Where applicable you should consider the use of gifts by 5 April 2018 to utilise the capital gains tax annual exemption of £11,300. 

Any assets standing at a loss, or assets which are considered to be of negligible value, can be sold before the end of the tax year to reduce gains incurred during the same period.

Under the no gain no loss rules spouses/civil partners can transfer assets between themselves free of capital gains tax. Such transfers should be considered in order to utilise two annual exemptions on the ultimate disposal of the asset. Such transfers can also reduce a CGT liability where one spouse/civil partner pays tax at a lower marginal rate than the other spouse/civil partner.

Inheritance Tax

Consider utilising the following inheritance tax exemptions to reduce your taxable estate:

  • Annual exemption of £3,000 (plus the portion of any unused allowance brought forward from the previous year)
  • Small gifts exemption (£250 per donee)
  • Gifts on marriage exemption (amounts depend on relationship between donor and donee)
  • Regular gifts out of income exemption

Where possible a donor should consider making gifts of appreciating assets. If the donor survives seven years from the date of the gift the asset will fall out of their estate for inheritance tax purposes, potentially saving tax at 40% on such a disposition. However, depending on the nature of the asset gifted, capital gains tax may be chargeable.

How Hallidays can help

By adopting some of the pre-year end tax planning measures identified in our blogs you may be able to reduce your overall tax liability for the year. If you’d like further support with your tax planning please contact our specialist tax experts on 0161 476 8276, email hello@hallidays.co.uk or visit https://www.hallidays.co.uk/services/taxation to learn more about how we can help.

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