Ten money saving tips for the new tax year

Lee Watson, chartered tax adviser and senior manager at Clive Owen LLP has produced tips for everyone from savers and employees to landlords and business owners about the new tax year.

As the new tax year begins, it’s important to ensure that you minimise the tax that you pay.
 
A lot of taxpayers tend to believe that tax savings are only for investment bankers and city stockbrokers but there are legitimate savings that can benefit most people.
 
Our tips are:

1.      Savers – If you’re considering investing in fixed term savings, you may wish to take advantage of the new savings allowance which is available from 6 April 2016. If so, you should ensure that the interest is paid upon a maturity date after 5 April 2016.
 
2.      Directors – If you’re a director of a company and have a healthy loan account balance, you too can take advantage of the new savings allowance. The company can pay you a commercial rate of interest for the funds loaned and as long as the interest is paid after 5 April 2016, some or all of the interest paid will qualify for the new savings allowance.
 
3.      Landlords – If your rental portfolio is profitable, you are married and your spouse pays tax at a lower rate than you, you should consider the split of the rental income between you both. It’s a common misconception that the rental income needs to be split equally but some legal forms need to be completed and professional advice will be required.
 
4.      Business owners – If you buy machinery, you’re allowed to claim a tax deduction for the whole cost in the year of purchase as long as the cost is less £500,000. However, the £500,000 limit will reduce to £25,000 from 1 January 2016 as things currently stand. It is important to ensure that you time any purchases correctly to take advantage of the tax relief available.
 
5.      Employees – Are you required to use your personal car for business journeys? Do you contribute to a personal pension? Do you pay professional subscriptions? Do you make charitable donations? If so, you may be missing out on tax reliefs.
 
6.      Beneficiaries – Have you received cash or assets from a loved one’s estate? If so you should at least consider a) maximising any return if the asset is income generating b) if you need the wealth and if you should pass the asset down to any of your own children c) if you need to pay the inheritance tax on the value of the asset and d) the impact on your own inheritance tax bill. Don’t make the mistake of not taking advice.
 
7.      Self employed – Being self-employed can be burdensome with keeping on top of paperwork as well as complying with legal obligations. A good accountant will at least consider a) claiming all of the expenses that you are entitled to claim b) if you are overpaying national insurance c) if you can benefit from a change of year end d) if you can benefit by trading via a limited company and e) if you need to register for VAT. Don’t make the mistake of believing that all accountants offer the same advice.
 
8.      Married couples – If one party to the marriage pays basic rate tax and the other does not utilise their full personal allowance, it is possible to transfer some of the unused allowance to the taxpaying spouse from 6 April 2015.
 
9.      Share investors – Every year most individuals have a capital gains tax allowance, which for the current tax year is £11,100. This means that you could make capital gains from a sale of shares and pay no tax as long as the gains are less than £11,100. If you were reluctant to sell the shares, you could always reacquire the shares 31 days later without causing a capital gains tax problem. Or you could gift the proceeds from the sale to your spouse who could then acquire the shares at the same time as the sale. The benefit being that you will have increased the base cost value of the shares tax free.
 
10.      Non-earners – If you do not have any earned income from either employment or self employment and are below state pension age, you will not be paying national insurance and may be missing an opportunity to claim a higher state pension when you do reach state pension age. If so, you should consider paying voluntary national insurance to ensure that you maximise your entitlement.