Small business owners and individuals can usually benefit from some simple tax planning ideas before the end of the current tax year 2009-2010 which ends on the 5th April 2010.
This article is not meant to be in any way comprehensive just to provide some ideas to consider. The first question to consider is have you used up the allowances that you are entitled to cash flow and resources permitting.
For example have you used up the most of your allowance for ISA investments in this tax year?
ISA allowances have increased in this tax year 2009-2010 as from 6th October 2009 the Isa limit has increased to £10,200 of which up tp £5,100 can be saved in cash for those people aged over 50.
Then you need to consider whether you have maximized your pension contributions?
If possible can you utilize your capital gains tax personal exemption of £10,100 for the tax year 2009-10.
If you are married or in a Civil Partnership then you should consider transferring any income producing assets to the lower income earner if one of the partners or spouse has a much lower level of earned income. With UK income tax rates increasing to 50% next year the tax savings could be very considerable.
If you are Self Employed then you need to review any of your current assets to make sure that they are still worth their book value.
For example if you have any debts that may prove irrecoverable then it would be prudent to make a bad debt reserve against them.
Also if you hold stock in your business you must review its value as regards what it actually cost and indeed consider if there us any obsolesce.
If it is worth less than cost then you should write the stock down to its net current realizable value.
This specific provision or write down will reduce your profit in your current accounting year or alternatively increase your losses this should help reduce your tax bill or perhaps increase any loss relief that you may be able to carry back.
Dealing with Inheritance Tax (IHT) purposes each and every person can give £250 away in each tax year to any number of recipients. In addition an annual allowance of £3,000 can be gifted.
I must say I find it amazing that these allowances have not been revised for many years. It is very interesting that the lifetime IHT allowance which allows an individual to make gifts in any one tax year amounting to £3,000.00 was actually introduced in 1980 and has not changed at all since then.
If you have not used the allowance in the previous year you can catch up in the following year but you have to spend the current years allowance first. You cannot carry forward unused gift allowance.
This gift allowance is actually available to both Husband and Wife so a married couple who have not previously used this allowance could each make the following gifts by 5th April 2010 that is before the end of the current tax year.
Firstly there is the £3,000 each for the tax year 2009-2010. Then there is the second £3,000 each for the previous tax year 2008-2009 tax year allowance.
In the next tax year which begins on 6th April 2010 a further annual gift allowance of £3,000 each can be paid out. This means that a married couple could make gifts amounting to some £18,000 completely free of all tax within a very short time.
Also it is possible to make regular gifts out of income (not capital) that will usually be regarded as being exempt.
More information
The Author writes many articles on Income Tax and Pension Planning for more information please go to Student Tax Refunds.
