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Tax Planning for 2013/2014

March is a perfect time to consider some last minute tax planning. Here are some common and fairly easy tax planning tips that can be done before the end of the year to reduce your tax bill for 2012/13.

HIGHER RATE TAX PAYERS

Pension contributions

By paying contributions into a personal pension plan, you can shift income from higher tax rates to lower tax rates by the amount of the gross contribution. So a £10,000 net contribution can save at least £2,500 of tax and you get £12,500 in your pension pot. (i.e. it will cost £7,500 to put £12,500 into your pension fund.) This tax saving can be significantly more if you earn over £100,000.

Charitable donations

Gift Aid donations work in much the same way as pension contributions shifting income from higher tax rates to lower tax rates by the amount of the gross donation. So a £1,000 net contribution can save at least £250 of tax and the charity gets £1250 as a donation.

BUSINESS OWNERS

Capital investment

As a sole trader, partner or employee, if you bring forward expenditure on fixed assets on which you can claim capital allowances, you can gain the tax relief. For example, buying a new van for £12,000 before 5th April 2013 can reduce your tax bill for this year by at least £3,480.

Delay dividend payments

If you can delay a dividend payment from your company until after 5 April, you can defer the tax payment for an additional year and possibly save additional tax as well if you are a 50% tax payer.

EMPLOYEES

Bring forward expense claims/ delay expense claim payments

Employee expense claims are tax deductible when the expenses are incurred. However, the expense reimbursement is only taxable when the expenses are actually reimbursed. By claiming the expenses in this tax year but delaying reimbursement until next tax year, you can reduce this years tax charge.

INVESTORS

Savings income
If you have savings, by opening up an account that pays annually instead of monthly, you can defer the interest received to next year. Most banks and building societies offer one-year bonds which pay interest at the end of the investment period.

Capital Gains Tax

If you have not used your Capital Gains Tax Annual Exemption of £10,600 this tax year and you are thinking of selling some investments, you could save up to £2,968 of tax by selling some investments before 5 April. This saving could be doubled if you have a spouse to which you could transfer half the investment.

If you are a 50% tax payer, please see our blog on tax planning tips for 50% tax payers.

 

For further assistance, please contact:

John Hill Tel: 01235 773300 Email: john@ace-accounting.co.uk

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