Know the facts to save tax
April marks the end of one tax year and the start of the next and with that comes a host of changes to tax rates, tax breaks and what opportunities you should be taking advantage of this year to save you and your business tax. Make this year count! The General Election has just caused plenty of conversation and there is always an element of uncertainty when major events like this occur. This reiterates the need to always be looking for ways to strengthen your own financial position. Spend a few minutes understanding the facts so you can ensure you are taking action this tax year.
The tax facts for business owners
It’s good news for business owners who operate through a limited company, as the rate of corporation tax is now a flat 20% regardless of profit level. This is joint lowest rate in the G20 and is an incentive to help business owners with minimizing tax. Most commercial owners will already be trading under a limited company so there is no action in this case as the change will automatically be applied by your accountant when they prepare your company tax return.
Investing into capital equipment
The Annual Investment Allowance will change from December 2015. The current, very generous allowance means that businesses can receive 100% of tax relief on up to £500,000 of capital equipment. In the Autumn Statement 2015 the new AIA will be announced and whilst it is not expected to reduce as low as the previous amount of £25,000, there are no guarantees right now.
If you are planning to purchase capital items this year then carefully consider timing whilst tax relief is advantageous
The general tax facts
There has been a small increase in the personal allowance this year and in addition married couples can now work together the utilise their personal allowances more effectively as a unit.
Part of the personal allowance can now be transferred to the lower earning spouse or civil partner, saving up to £212 per year.
Unfortunately higher rate and top rate taxpayers can’t benefit though.
The tax facts on savings and investments
The first £5,000 savings income earned can now be taxed at zero % for some savers. Check using the HMRC online tool
to see if you are able to get your interest paid without tax being deducted.
The ISA allowance has been increased slightly to £15,240. The major increase came into force in 2014 when the allowance increased to £15,000.
Investing the maximum ISA allowance each year for you and your spouse is advantageous for tax planning.
In addition, investments and withdrawals can be made in and out of a Cash ISA within the same tax year and not count towards the annual subscription limit. This gives savers more flexibility to get their hands on their money if they need to.
The tax facts on pensions
One of the biggest changes this year relates to pensions and the new flexible rules. Pension funds can now be drawn from age 55 with 25% lump sum being free of tax. The rest of the withdrawals are subject to income tax at the usual rates, however this is a marked improvement on the previous system and it is aimed to give pensioners more freedom over their pension choices.
Figurit offer commercial business owners bespoke tax advice to maximise tax relief and plan for a secure financial future. Call today to speak with one of our specialist commercial team.
020 7376 9333