With the end of the tax year fast approaching, now is the time to take action on any last minute tax savings opportunities. Much tax can be saved using some very straightforward and accessible tax planning, but it needs to be completed before 6 April 2016.

Firstly, ISAs are a fantastic way to save tax on savings income. The annual limit to be paid into an ISA currently £15,240 and this can be in shares, cash, or a combination of the two.  In addition to this, parents and grandparents (or anyone else) can pay into a tax-free junior ISA for a child up to a maximum of £4,080 every year.  The funds cannot be withdrawn until the child reaches 18 years old, and as such, a potential downside is that this cash is then tied up possibly long term.

In addition, significant tax savings can come from investing in small and growing businesses through schemes such as Enterprise Investment Scheme and Venture Capital Schemes. The tax savings available on such schemes is significant and depending on the level of investment you are looking to make, can be extremely attractive.

Another tax efficient investment is through making pension contributions. It is possible to invest £40,000 in a pension scheme in the current year and obtain tax relief (subject to level of earnings and lifetime allowance).  If you have not used your pension allowance in previous years it is also possible to use up to three years unused contributions from earlier years, so long as you were a member of the pension scheme.

Payments of pensions through salary sacrifice can be even more attractive where by you are earning over £100,000. This is because your personal allowance begins to be clawed back once your earnings are over this level by £1 for every £2 over £100,000.  Paying into a pension effectively lowers your gross earnings, and as such there is scope for more personal allowance being maintained. Likewise, for those earning between £50,000 and £60,000, child benefit is clawed back.  Again, paying into a pension can mean that some or all of your child benefit is preserved.

Declaring dividends in the current tax year could prove to be extremely tax efficient; especially as from 6 April 2016 the rate of tax on dividends is increasing. If you have not yet utilised your basic rate band of income tax, or even your higher rate band depending on future profit projections, now is the time to consider declaring dividends.

If you are planning on making a gift to charity, you might want to consider the timing of that gift in order to maximise the tax relief achieved. If you are a higher rate this tax year, but anticipate your next year’s earnings to fall, it would be much better from a taxation perspective to make the gift before 6 April 2016 as you will save tax at 40% rather than 20%.  Likewise, if you have a spouse who is in a different tax bracket, it might be worth considering who the gift is made from.

Looking to capital taxes, it is worth considering the timing of any disposals of assets, such as shares, you are planning on making. Every year, each individual gets an annual exemption (currently £11,100).  This means that the first £11,100 of gain made on a disposal is totally tax free. If you don’t use it in the current tax year, it is lost.  Therefore, if it is possible to make any disposal in two stages (one in the current tax year and one in the next), this is worth considering.  It is also worth considering that transfers between spouses are exempt for tax.  Therefore, again there is opportunity to utilise another annual exemption by splitting the asset between you and your spouse, and selling a quarter each this tax year and a quarter each next tax year.  This means that between you, you have an exempt gain of £44,400.

Inheritance tax (IHT) can also potentially be saved with a few simple tax planning opportunities. Usually, any gifts made within 7 years of death are potentially liable to IHT. However, each year it is possible to gift £3,000 without any IHT consequence, and cash is exempt from any capital gains tax. If a gift was not made in the prior tax year, this rises to £6,000.  Therefore, a couple could give up to £12,000 between them in one tax year to their children without suffering any tax.

If you would like further information about any of the above tax saving measures, both for the current tax year or the next, please get in touch – we would love to help!