Tax planning tips for Individuals and Family 18 Feb

Tax planning tips for Individuals and Family


Make sure you tell HMRC (TAX AUTHORITY) which of your properties should be treated as your main home for tax purposes when you buy a second (or even third) home. The property that has always been your main home is free of capital gains tax (CGT). Any other property where you lived for part of the time will attract a tax exemption for the periods you have lived there and have elected for it to be your main home. If a property has been your nominated main home at any time, the gain for the last 18 months of ownership (36 months if moving into care) is free of tax. Even if you do not live there during that final period. Note that the position can be somewhat more complicated if an overseas property is involved.


If you are getting married or entering into a civil partnership, and you both own separate properties which you continue to occupy for some periods, you need to nominate one of them as your main home within two years of your marriage/civil partnership. Once married, you can have only one main home between you for tax purposes. So nominate the one that is likely to make the best use of your CGT property exemption, otherwise HMRC (TAX AUTHORITY) will designate the property that you occupy the most as your main residence.


Contribute up to £4,080 each year into your child’s Junior ISA. The fund builds up free of tax on investment income and capital gains until the child reaches 18, when the funds can either be withdrawn or rolled into an adult tax-free ISA. Relatives and friends can also contribute to the child’s Junior ISA, as long as the £4,080 limit is not breached. Any child aged under 18 who lives in the UK can have a Junior ISA if they were not entitled to a child trust fund (CTF) account, although a CTF can be switched to a Junior ISA.


If your income is more than £60,000, and you or your partner claim child benefit, you will be subject to a tax charge to claw back the full amount of benefit. If your income lies between £50,000 and £60,000, the child benefit tax charge will be equivalent to 1% of the child benefit TAX PLANNING TIPS 2016/17 2 If a property has been your nominated main home at any time, the gain for the last 18 months of ownership is free of tax. The tax charge applies to the higher earner, irrespective of who claims the benefit. To avoid the tax charge you can either stop claiming child benefit, or reduce your income below £50,000.


If your marriage is permanently breaking up, aim to divide up the valuable assets, such as shares and land, as soon as possible. If you complete any such asset swaps in the tax year in which you separate from your spouse, you will not have to pay CGT based on the market value of those items. And if you delay until the next tax year, the tax charge could be painful. You may gain AAT qualification if you want to gain detailed knowledge on this topic.


Check your PAYE tax code. Many PAYE tax codes are incorrect when issued. HMRC (TAX AUTHORITY) may have included an estimate of your unearned income that means you will pay tax on that income earlier than you would if it was assessed through your self-assessment tax return. Tax codes for 2016/17 will be particularly problematic with bank and building society interest and dividends all being received gross for the first time. You can ask HMRC (TAX AUTHORITY) to remove this estimated income and also correct any other errors.


Can you use the new transferrable amount of personal allowance? Married couples and civil partners are able to share some of their personal allowance between them. The unused allowance of one partner can be used by the other, meaning an overall tax saving for the couple. The amount you can transfer is capped at £1,100 for 2016/17 (10% of the personal allowance), and a transfer is not permitted if either partner is a higher or additional rate taxpayer.


Check how much you are paying in national insurance contributions (NICs). If you have more than one job, you may overpay NICs during the tax year. You can then reclaim any overpaid NICs from HMRC (TAX AUTHORITY) after the end of the tax year. However, you can prevent the overpayment in the first place by deferring payment of NICs on one of your jobs by sending HMRC (TAX AUTHORITY) a completed form CA72A (either online or by post).


If you own a trading company, then you can reduce the CGT payable on a future sale by spreading the shares between yourself and your spouse. If you both hold at least 5% of the ordinary shares, have done so for the 12 months before the sale and are either employed by the company. Or hold the position of director or company secretary, you should both qualify for entrepreneurs’ relief on any gains made when the company is sold. This relief applies a reduced rate of CGT of 10% to the first £10 million of lifetime gains made per person.

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