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Pre- year-end tax planning

Having just paid the balance of your 2018/19 tax liability, the 2019/20 tax year end is just around the corner!
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Now is the perfect time to consider a bit of pre year-end tax planning in order to minimise liabilities for the coming year.

The personal allowance is set to increase to £12,500, it is important to consider profit sharing ratios so as to not waste any personal allowances across a family business. An alternative method can be to utilise the marriage allowance transfer which allows you to transfer £1,250 of your personal allowance to your spouse where your earnings are below the £12,500. This can reduce the collective tax liability by up to £250. Where marriage allowance hasn’t been claimed in the past but could have been, we can backdate your claim by 4 years with a potential maximum refund of £900.

Savings allowances remain the same as last year at £1,000 of tax-free savings income (£500 for higher rate tax-payers) and a £20,000 ISA allowance. The tax-free dividend allowance remains at £2,000.

Pension contributions of up to £40,000 can contribute to an extension of your basic rate band.

For the coming year, it is important to note that the Annual Investment Allowance (AIA) is set to reduce from £1,000,000 per year to £200,000 on 1 January 2021. If your financial year straddles this period, it is important to ensure that any expenditure in excess of the £200,000 is done before the end of December this year.

If your financial year end is approaching, we can assess profitability to date and make pro-active tax planning suggestions e.g. use of capital allowances and dividend planning for companies.

Kathy Harris

February 2020

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