It is estimated that UK consumers are set to waste £4.6 billion in unnecessary tax payments by not taking advantage of legitimate tax allowances and concessions during 2016.
Some of the current tax allowances for 2017/18 tax year are listed as follows:
- £11,500 personal allowance
- £20,000 per annum ISA allowance – will provide tax free growth/income and may be used to provide tax free income whatever your personal tax rat
- £5,000 per annum dividend allowance provided from your investments and tax free to the basic rate taxpayer
- £11,300 annual capital gains tax allowance – excess of gains above this figure are taxed at 10% for basic rate taxpayers and 20% and 28% for higher and additional rate taxpayers respectively
- A maximum of £720 per annum tax credit on pension contributions for any UK citizen under the age of 75 with no earned income – this includes minors - based on a gross contribution of £3,600 (£2,880 paid net)
- £1,000 per annum investment income allowance – this will depend upon your other income and is added on to calculate higher rate taxes
- Tax relief at your highest rate on pension contributions of £40,000 per annum providing that your EARNED income is at least this amount – it is also possible to backdate past earnings up to 3 years ( subject to a £130,000 limit) if you haven’t made contributions during this time
- Up to 5% per annum ‘withdrawals’ per annum from an onshore or offshore Life Assurance Investment Bond for up to 20 years irrespective of your present tax rate and with no maximum investment – these withdrawals are treated as a deferment of tax and may be taxed on final encashment at the higher rate for onshore bonds and at full rates for offshore bonds – special rules enable even these taxes to be reduced - please ask for details
- Inheritance tax Nil Rate Band of £325,000 is available for all estates and can be used years after death if for example capital is initially left to spouse i.e. £650,000 in total between spouses may be left tax free. -SEE OUR 2017 GUIDE
- Main Residence IHT Allowance – from 2017 – 2020 a total of £175,000 per individual (spouses) will be allowed free of IHT where a residence of at least this amount has formerly been owned by the deceased, The allowance is graduated and commences at £100,000 in 2017 increasing to £175,000 in 2020 -SEE OUR 2017 GUIDE
This list is not exhaustive but should provide some idea of how taxation could be reduced – more concessions are available for higher rate taxpayers that involve investment into higher risk or illiquid investments that may be suitable for more experienced investors. Our advisory clients are automatically updated annually to ensure that all desirable concessions are utilised.