Theres still time to reduce your tax bill before the Budget
Theres still time to reduce your tax bill before the Budget
By Tim Relf
TIME is running out to cut your tax bill with the Mar 17 Budget looming and this years concessions ending on Apr 5. But there are ways to stop the fruits of your hard work lining the taxmans pockets.
Make sure pension payments have been made, says Carlton Collister of Grant Thornton. Tax relief on these can be claimed against this and last years profits.
"The 40% relief, now available for those in the upper income bracket, could go with the Budget."
Giles Penn of Deloitte and Touche Agriculture says: "If you have spare cash, top up contributions. Pensions are tax-efficient."
Figures from Deloitte show the slump in fortunes will mean tax takes more than 50% of many farmers profit this year, compared with 20% in the previous period.
With the treatment of trusts a likely target in the Budget, beneficiaries personal allowances should be used, adds Mr Collister.
An averaging election should also be made for profits in the 1994/95 and 1995/96 years if appropriate. And any farming losses then should be claimed against other income in 1995/96.
For inheritance tax purposes, ensure that the £3000 annual exemption (plus the previous years) is used.
Investing in Personal Equity Plans while they are still available is also useful, adds Mr Collister. Up to £6000 and £3000 can be put in general and single company PEPs respectively.
"Using them this year and next means up to £18,000 can be sheltered, tax-free, a person. They may be replaced by the Individual Savings Account in 1999."
On the capital gains tax front, farmers should make full use of the annual £6500 exemption. If you have shares, "bed and breakfasting" might be possible, says Mr Penn.
This involves selling shares, then buying them again straight away. The repurchase price becomes the base on which any future liability is calculated. Since its probably higher than the original cost, the bill on any future sale will be cut. And any gain realised in the "bed and breakfasting" will, ideally, make use of the allowance.
Also make sure you are fully using the £4045 personal income tax allowances, says Mr Penn. "Setting up a joint bank account between husband and wife, for example, means the interest payments are split between the two."
Other useful measures are:
• Delay disposals of any assets until after Apr 5 to defer CGT liability until next year.
• If you are investing, it might make sense to do so sooner rather than later with 50% first year capital tax allowance under review.
• If the business has company cars, ensure 2500 business miles (or better still, 18,000) have been done by the financial year end.
TAX POINTERS
• Income tax – consider:
Pension
Trusts
Averaging
Backdated loss relief
Herd basis election
• Capital Gains tax – consider:
Annual £6500 exemption
Holdover relief
• Inheritance tax – consider:
Annual £3000 exemption
TAX POINTERS
• Income tax – consider:
Pension
Trusts
Averaging
Backdated loss relief
Herd basis election
• Capital Gains tax – consider:
Annual £6500 exemption
Holdover relief
• Inheritance tax – consider:
Annual £3000 exemption