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The period leading up to the end of the tax year on 5 April is one of the best times to review your taxes and finances. Carrying out an annual review of your tax affairs could significantly reduce your own and your family’s tax liabilities. As always, we would be delighted to discuss with you the issues involved and any appropriate action you may need to take.
Throughout this publication the term spouse includes a registered civil partner. We have included the relevant amounts for 2016/17.
Currently the AIA gives a 100% write off on most types of plant and machinery costs, but not cars, of up to £200,000 per annum from 1 January 2016.
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Significant changes have been made to the rates of capital gains tax (CGT) in 2016/17:
If the payment of bonuses to directors or dividends to shareholders is under consideration, give careful thought as to whether payment should be made before or after the end of the tax year. The date of payment will affect the date tax is due and probably the rate at which it is payable.
Savings income is income such as bank and building society interest. From 2016/17 the Savings Allowance (SA) applies to savings income. Income within the SA is taxed at a new 0% rate (the 'savings nil rate').
Charitable donations made under the Gift Aid scheme allow a charity to claim back 20% basic rate tax on any donations and if the donor is a higher rate taxpayer they can claim back the tax difference between the higher rate and the basic rate on the donation. Therefore a cash gift of £80 will generate a refund of £20 for the charity so that it ends up with £100. The donor can claim back tax of £20 so that the net cost of the gift is only £60.
There are a wide range of investments available and we consider some of the main ones with special tax rules.
From April 2017, landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for these finance costs.
For a family business it is generally worthwhile paying wages to a spouse of between the employee lower earnings limit (£112) and the employee threshold (£155) per week. At this level of earnings no NIC will be due. The spouse will still accrue entitlement to a state pension and certain other state benefits.
There are many opportunities for pension planning but the rules are complicated and there have been significant changes recently so do check the position before making any decisions.
Each spouse is taxed separately, and so it is an important element of basic income tax planning that maximum use is made of each individual’s personal allowance, the starting and basic rate tax band and the SA and Dividend Allowance. It may be necessary to consider gifts of assets (which must be outright and unconditional) to distribute income more evenly.
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