TaxPersonal TaxQ&A: Year end tax planning

Q&A: Year end tax planning

Frank Haskew and Francesca Lagerberg of the ICAEW's tax faculty provide practical advice on year end tax planning

Is the end of the tax year the best time to undertake tax planning?

Ideally, tax planning is something you should consider throughout the year, but the end of the tax year means that if you do not use certain allowances by 5 April 2002, then they will be lost for the 2001-02 tax year.

The strategy should be (subject to, for example, investment considerations) to maximise the use of available allowances by 5 April 2002.

So what should I do?
For income tax, you should look to use up your investment allowances into ISAs. You can invest up to £7,000 each in a maxi-ISA in any one tax year. Any income and gains made within the ISA will be tax-free. However, remember that if you wish to invest only in a cash ISA, the investment limit is £3,000.

Make sure that you maximise all available personal allowances.

For example, if your spouse has little or no taxable income, ensure that your spouse owns any income producing assets such as stocks and shares.

Ideally, this should be done at the start of the tax year rather than at the end so as to shelter as much investment income as possible.

For capital gains tax, you have an annual capital gains tax exemption of £7,500. For a 40% taxpayer, the potential saving is £3,000. Again, remember that your spouse or partner also has an annual capital gains tax exemption, but watch transfers to a partner as they may trigger capital gains tax.

For inheritance tax, you have an annual exemption of £3,000 a year. Further, if you did not use your allowance in the previous year, you may claim it in the current year if you have used up the current year’s allowance.

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

3w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

7m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter