Action for the start of new 2012/2013 tax year commencing 6 April 2012

Mike Cracknell from Birkett Long examines how you can make the most of tax efficient financial planning opportunities before the current tax year ends on 5 April 2012 and the new year commences 6 April 2012.

1. Make the most of Individual Savings Accounts where all returns are paid free of Income Tax and Capital Gains Tax.  The maximum permitted for the current tax year is £10,680.

2. Pension funds enjoy virtual tax free growth and the use of pension contributions can in some instances mitigate higher rates of personal taxation.  Savers can pay the equivalent of their taxable income from employment or self-employment in pension contributions.  This is capped at £50,000 gross with Income Tax relief available at their highest marginal rate.  For higher earners wishing to contribute more, “excess” contributions can in certain circumstances be carried back to utilise unused allowances from the 2008/09, 2009/10 & 2010/2011 tax years providing payment is made before 5 April 2012.

3. Parents with children under 18 not possessing a Child Trust Fund can subscribe £3,600 to a Junior Individual Savings Account (ISA). Any income from this investment is paid tax free. Normally where a child’s income exceeds £100 based on gifts made by one parent, all the income is then taxed against that parent. This rule does not apply for a Junior ISA investment.

4. Capital Gains Tax – the annual exemption is £10,600 for the 2011/2012 Tax Year.

5. For those prepared to take a high risk approach towards investment, up to £200,000 can be invested in a Venture Capital Trust (minimum 5 years) and £500,000 in an Enterprise Investment Scheme (minimum 3 years) with Income Tax relief available at 30%. Other tax breaks are provided. Venture Capital Trusts provide tax free dividends and any gains on disposal of shares are free of Capital Gains Tax. Gains on the sale of Enterprise Investment Scheme shares are Capital Gains Tax free after 3 years and Inheritance Tax Business Property Relief is available on the value of the shares after two years.

6. Inheritance Tax – the annual gift exemption allowance is £3,000. If no such gift was made for the 2010/2011 tax year, then £6,000 can be gifted before 5 April 2012.
Smaller gift allowances of £250 can be made for the 2011/2012 tax year to anyone who is not a recipient of all or part of the larger gift.

Birkett Long’s Financial Services Team will give specific advice for your circumstances and offer a free initial consultation.  Call Mike Cracknell 01206 217309 or email [email protected].