Generate tax-free cash from a spare room
The annual rent a room relief was increased from £4,250 to £7,500 from 6 April 2016, so individuals can now rent out a room in their main residence for up to £144 a week tax-free.
Enjoy tax-free or low tax capital gains
• Use the annual exemption: everyone, including minor children, can realise capital gains up to the £11,100 annual exemption tax free in 2016/17. If it is desired to retain share investments, they can be reacquired after 30 days without losing the benefit of a disposal that utilised the annual allowance.
• Remember entrepreneurs’ relief: gains of up to £10m on qualifying disposals of businesses or business assets will be taxed at only 10 per cent instead of the normal 20 per cent rate for higher rate taxpayers.
• Use the new investors’ relief: a lifetime limit of £10m is now available for gains realised by individuals (other than employees) who subscribed for shares in unlisted or AIM-listed companies to be taxed at only 10 per cent instead of the normal 20 per cent rate for higher rate taxpayers. To qualify, shares must be held for at least three years.
Larger tax-efficient investments
• Qualifying investments of up to £1m under the Enterprise Investment Scheme (EIS) and £100,000 under the Seed Enterprise Investment Scheme (SEIS) attract income tax relief at 30% and 50% respectively. A carry back claim made for a 2016/17 investment would reduce tax liabilities for 2015/16, accelerating tax relief. Disposals of EIS/SEIS investments are also potentially free of capital gains tax.
• Qualifying investments of up to £200,000 to a Venture Capital Trust also attract income tax relief at 30 per cent, with a potentially tax-free disposal.
EIS and VCT investments are frequently high risk and advice from a qualified Independent Financial Adviser is recommended.
Give to charity and carry back to accelerate tax relief
Consider making Gift Aid donations before 31 January 2017 to provide an early benefit to the charity, and elect for the donation to be treated as made in 2015/16 to accelerate tax relief.
Inheritance tax
Utilising the annual £3,000 gifts exemption and the exemptions for small gifts of up to £250 and larger regular gifts out of normal income should not be overlooked.
Dawn Register is a partner of BDO Tax Dispute Resolution
http://media.ftadviser.com.s3.amazonaws.com/FT-FA-Supp-Prudential-2017-01-19_PRESS.pdf
Key points
Legitimate tax planning is entirely unaffected by HMRC’s clampdown on tax avoidance.
Individuals with incomes near the £100,000 and £150,000 thresholds can reduce their tax liabilities by reducing their taxable income below £100,000 or £150,000.
Use the annual exemption on capital gains up to the £11,100 annual exemption tax free in 2016/17.
