28 January 2019

Tax efficiencies for 2019

This a good time to start planning your tax affairs before the end of the tax year on 5^th April.

Here’s our round up of the latest tax rules for some useful planning points, to make you tax efficient in the year ahead.

An obvious tax planning point would be to maximise your ISA allowances for the 2018/19 tax year (currently £20,000 each).

You might also want to consider increasing your pension savings before 5 April 2019 as the unused annual pension allowance is lost after three years.

For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will.

Pension Planning

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers contributions by both the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there are rumours that this generous relief may be reduced in future.

Inheritance Tax

In addition to reviewing your Will, you could consider making gifts up to the annual allowance or out of surplus income to make the most effective use of tax planning from your estate and to reduce Inheritance Tax long term. 

Although a complex area of taxation, there are numerous options worth considering. These include passing on your estate to a spouse or civil partner tax free or giving regular gifts to family and friends that can be tax efficient. 

Increased Capital Allowances

The Chancellor announced a temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery to £1 million from 1 January 2019. However transitional rules mean that the full amount will not necessarily apply to your business straight away.

For example, if your business year end is 30 June 2019 the maximum AIA would be £600,000 being 6/12 x the old £200,000 limit plus 6/12 x the new £1 million limit. The following year to 30 June 2020 would be entitled to the full £1 million.

New Capital Allowance for Commercial Buildings

The Autumn 2018 Budget announced a new 2% straight line tax deduction for the cost of construction or renovation of commercial buildings and structures. HMRC have now issued a technical note setting out the details for the operation of the new relief.

Unlike the old Industrial Buildings Allowance the new relief is available for the construction of shops and offices as well as factories and warehouses.

The new tax break is available where the contract is entered into and construction costs are incurred on or after 29 October 2019. The allowance is available to commercial property landlords as well as trading businesses. There are special rules for leasehold buildings which determine whether the landlord or tenant is entitled to the allowance.

Planning point: Note that there are more generous plant and machinery allowances available for fixtures and fittings within the building and we can work with you to help you maximise tax relief. The AIA referred above would mean that there may be 100% capital allowances for equipment such as central heating and air conditioning.

Whatever your personal or business plans for 2019 include, we can help you with your tax efficiency…

Contact our expert tax team on 0115 964 8888 or email enquiries@rwbca.co.uk today.

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.