You are always on the home stretch when it comes to the health of your annual finances. Technically, the year-end represents the start and end of your financial time. Primarily, it involves rigorous tax planning as per deadlines.
Now, several strategies can improve your retirement savings, government entitlements, and even avoid possible penalties to decrease your year-end tax bill.
Capital Gains Tax
The current CGT annual exemption allows individuals to make more than £12,000 gains in 2019-20. Ideally, the transfer of assets among spouses can be significantly advantageous when it comes to your annual tax exemption.
Enterprise Investment Scheme
Although EIS relatively represents a higher risk, it is an efficient tax investment. In fact, your Investments can acquire a 30% annual income tax credit against your current year’s income tax liabilities. As of now, EIS investments have an annual allowance of £1,000,000.
If you used up the allowance for the 2019-20 tax year, you can avail more than £20,000 in cash. However, you should be aware of the fact that the investment does not guarantee tax relief. Currently, individuals below the age of 18 can get an ISA allowance of £4,368.
Yes, taxpayers can have £3,000 in annual gift exemption. And if you did not get it last year, then you can claim £6,000 even offset additional gifts. There are, however, other exemptions when it comes to small gifts such as marriage, political, or charitable organizations.
Well, pensions are still one of the most flexible strategies for retirement savings. You can get a £40,000 annual allowance for 2019-20. If you, for example, have an excess income of, say, £150,000, you can scale up the reduction to £10,000.
Added Tax Rate
If you have more than £100,000 income, you can practically pay your taxes at the rate of more than 60%. It is imperative to remember that you can reduce your taxable income so long as you defer income via dividends or make pension contributions or gift payments.
It enables you to bring forth your unused annual tax allowance (AA) of the past three years. However, you will only receive tax relief once you make the year-end contributions. However, if you do not have contributions for the past three years, you can Carry Forward more than £170,000.
What about Seed EIS?
If you are cautious about high-risk tolerance, you can get Seed Enterprise Investment Scheme (EIS) that provides 50% tax credit on your investments in the UK. If you have capital gains, Seed EIS has a 14% of CGT deduction for you.
Venture Capital Trust
VCT or Venture Capital Trust is an effective tax investment strategy that offers private equity capital for business expansion of small companies. The yearly allowance for VCT investments stands at £200,000.
Annual tax strategies for small businesses often turn out to be complicated. The good news is that you can pay fewer taxes. Get that much-needed assistance from your tax advisor. The best thing you can do for yourself and your business is to devise annual tax strategies before it is too late.
And the more time you save, the more calculative actions you can take to decrease your year-end tax bill. Besides, the last thing you want is not to be compliant with current HMRC’s tax standards.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our consultants if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.