As the tax year is about to end we have put together a collection of personal and business tax planning tips:

Businesses

• Consider dividend payments to utilise lower tax threshold shareholders.
• Consider keeping directors’ loans to below £5000 to avoid BIK tax charge.
• Reduce IR35 deemed payment by making a company pension contribution.
• Carry back current year losses of up to £50,000 for three years.
• For companies with 31/3 year ends, consider pension contributions to take profits down to below £300,000 or to create trading losses, and to reduce National Insurance Contributions.
• Consider the timing of chancing a company car, especially if 31/3 year end in light of changes to the Capital Allowance.
• Where possible, ensure major items of expenditure are incurred before the accounting year end to accelerate the tax relief.
• Consider whether a change of accounting date would give rise to accelerated relief for overlap profits.
• Where an individual is both employed and self-employed, a claim for deferment of Class 4 and/or Class 2 National Insurance Contributions should be considered.
• Consider switching your company car to one with low CO2 levels and reimbursing your employer for all private petrol (to avoid high benefit in kind charges.

Pensions

• Having just paid a significant Income  Tax bill, with another on account in July, consider making a contribution to a Personal Pension prior to 5/4/09 to reduce next year’s tax bill, effected by extension to your basic rate tax band.
• Extending the basic rate band can be beneficial for higher rate tax charges arising from dividends and/or investment bond encashments.
• Be aware that employees may be better off to receive an employer’s contribution if NIC savings are passed on.
• For those with significant earnings, two input periods can be used to potentially contribute up to £480,000 (gross) prior   to 5/4/09.
• All high rate tax payers, even with no earnings, under age 75, should consider extending the basic rate band by £3600.
• Pension contributions do not need to be made in cash.
• If the Lifetime Allowance is likely to be an issue, consider primary or enhanced protection which must be in place prior to 5/4/09.

Non-resident individuals

• Review days spent in the UK and consider whether the new day counting rules have affected your residence status.
• If you are close to the 90 day limit, consider how you might restructure your visits to the UK in 2009/10 to ensure you remain non-UK resident.

Non UK domicile individuals

• To avoid the £30,000 remittance basis charge (RBC) and retain your entitlement to personal allowances, consider organising your affairs so that you  become an automatic remittance basis taxpayer (eg by keeping less than £2,000 of foreign unremitted income and gains).
• Consider reinvesting offshore funds in non-income producing assets to reduce or eliminate taxable foreign income.
• If you are paying the £30,000 RBC,  careful planning is required to minimise UK tax for 2009/10 and future years:
  - Review 2008/9 remittances to date and consider advancing or deferring any planned additional remittances accordingly.
  - Consider spousal transfers to ensure that only one £30,000 RBC is paid per couple
  - Consider setting up separate bank accounts each year in relation to nominated foreign income/gains to avoid the creation of “mixed funds”.

Families

• Transfer assets to spouse/Civil Partner (CP) to sell thereby making use of two CGT allowances.
• Transfer income producing assets to lower tax paying spouse/CP to reduce tax in 2009/10 – utilising two personal allowances and basic rate tax bands.
• For those over 65 make best use of age allowances by sharing income.
• If you are a business owner, can you pay your spouse/CP?
• Can you ‘shift income’ before legislation is introduced?
• Gift assets to children to make use of their CGT allowances and/or Income Tax allowances (not from parent if child is under 18).
• Remember children have their own £3600 p.a. pension contribution allowance with automatic 20 % tax relief.

Estate Planning

• Consider making gifts to individuals or trusts whilst asset values are depressed (take account of CGT impact).
• Make full use of £3000 (each) annual exemptions and any unused exemptions from 2007/08.
• Don’t forget the very beneficial normal expenditure out of income exemption.

Investments

• Make use of ISA allowances - up to £7200 if over 18, up to £3600 if 16 - 18.
• Up to £1200 p.a. to CTFs for children born before 31/8/02.
• EIS:
  • up to £500,000 for Income Tax relief @ 20%.
  • unlimited CGT deferred relief (possible significant tax advantages for gains previously realised in 2006/07 and 2007/08).
  • gains tax free if held for requisite  period
• VCT:
  • up to £200,000 for Income Tax relief @ 30%. Dividends and gains are tax free.
• Film Schemes – still available for individuals and companies.

Capital Gains Tax

• Make best use of £9600 08/09 allowances, for each person (£4800 within trusts).
• Consider spousal gifting.
• Can losses be created to reduce this year’s gains or to carry forward to future years?
• If you wish to retain the investment that holds the gain (or loss) consider ‘Bed and ISA’, ‘Bed & Spouse’ or ‘Bed & Pensions’ (using in specie contribution).

Other tax planning opportunities

• Gift Aid Scheme
• Furnished holiday lettings

• Rent-a-room Relief
• Entrepreneurs Relief