Don’t lose your personal allowance!
When the end of the financial year approaches, we always remind our clients of an essential personal finance rule – don’t lose your personal allowance! When you are busy working or running a business, it’s all too easy to overlook the importance of maximising those tax benefits that are available to you. Let’s take a closer look at what this means in practice, helping you to plan for the forthcoming tax year in advance.
Higher earners – what to watch out for
If your adjusted net income is greater than £100,000, every £2 above this level will result in a £1 reduction to your £11,500 of personal allowance. This restriction is applicable to net income (adjusted) on earnings between £100,000 and £122,000.
How can you mitigate this?
There are various accepted ways in which you can minimise your adjusted net income by taking advantage of schemes available to help you save or to give to charity in a tax effective way. For example:
1. You can increase your pension contributions to reduce your adjusted net income (pension contributions are tax deductible).
2. You can also reduce your adjusted net income by claiming Gift Aid against charitable donations. These measures can help you to save tax at a 60pc effective rate.
You could also avoid this tax trap by agreeing a salary sacrifice at work, where a portion of your monthly salary is exchanged in kind for an equivalent benefit that is free from tax.
Be aware that the rules changed from 6th April 2017, but that contributions to your workplace pension and the childcare voucher scheme will still continue to be eligible forms of salary sacrifice for personal allowance calculation (and maximisation) purposes.
Other tax efficient investment and saving schemes
There are other ways to save efficiently for the future and to minimise your tax bill, including ISA saving and investment in the AIM market. We can help you to identify the routes that best suit your attitude to risk, your portfolio and your objectives.
Looking for accountancy, finance and taxation help?
Our team of expert accountants, tax specialists, financial advisors and wealth management professionals can help you to manage your assets effectively and in line with your personal goals and objectives. Whether you are looking for outsourced business accounting services, personal taxation advice, a business health check or personal wealth management planning, we provide highly professional and value-adding services for a cost-effective price. Our team is highly qualified, with years of experience in our professional fields.
BC Sunderland Driver provides a range of accountancy services, wealth management and advisory support to clients across the Aire Valley, including Keighley, Skipton, Shipley, Saltaire and Bradford. To find out more about how we can help you, contact us today.