Year end tax planning April 2010

January 2010

There are a number of year end tax planning issues that it may be productive for you to look at before the end of the current tax year 5 April 2010 (individuals and self employed).

The list we have added to this article is not comprehensive - if you would like to discuss your individual circumstances, please contact us as soon as possible as action may need to be taken before the end of the tax year.

Individuals

Have you maximised your ISA investments this year?
Have you maximised your pension contributions?
If possible have you utilised your capital gains tax personal exemption? £10,100 2009 -10.
If your employer still pays for the private fuel used in your company car you can effectively avoid the car fuel benefit charge if you repay your employer for the private fuel before the end of the tax year. It may be worth crunching the numbers as the tax benefit in kind is expensive and the private fuel refund may be less.
For Inheritance Tax purposes each person can give £250 a year to any number of recipients, as well as £3,000 annually over and above that. They can also make regular gifts out of their income (not capital) that should fall to be exempt.
If you are married or in a Civil Partnership and one partner/spouse has a much lower level of earned income, consider transferring income producing assets to the lower income earner. With income tax rates due to rise to 50% next year savings could be significant.

Self Employed

If you are carrying stock on your balance sheet at cost and it is now worth less than cost, you could revalue, reduce the stock to its current realisable value. This will reduce your trading profit in the current year or increase your losses; it will also reduce your tax bill or increase any loss relief carry backs.
If you are about to invest in new vehicles or equipment you should work out the most effective purchase date. Should you commit to the expenditure before the tax year end or afterwards? If your trading year end is 31 March this could make a significant difference. It may help you avoid wasting personal tax allowances or maximise the benefits of loss relief carry back.
If you are considering the sale of a business or business property which will create a chargeable gain for capital gains tax purposes you might be advised to delay contracts until after 5 April 2010. Any tax payable on gains made on or after 6 April 2010 will not be due for payment until 31 January 2012. Tax payable on gains on or before 5 April 2010 will be due for payment a year earlier, 31 January 2011. At present CGT rates are still 18% with the generous Entrepreneurs' Relief of 10% on sales of qualifying business assets - up to a lifetime maximum of £1m chargeable gains. In his recent Pre-Budget Report the Chancellor made no mention of increases in the 18% rate 2010. However, there is always the possibility that CGT rates may be increased in the 2010 Budget....
Consider your pension options. Could you make additional contributions before 6 April to reduce your higher rate tax this year? But beware of the anti forestalling provisions if your income is more than £130,000.
Are you able to bring forward revenue expenditure, repairs to equipment, redecorating the office, that will help you to reduce profits or increase losses for carry back?

As indicated in the opening to this article the ideas outlined above are by no means all the options you may have to minimise the amount of tax you pay this year. The key is to bring your current management accounts up to date and weigh the various options. Please call if we can help.