Easter takes place before the last day of the 2012/2013 tax year (Friday 5 April) – there may be fewer days than you think in which to use your tax allowances!
Capital Gains Tax
The capital gains tax exemption for tax year 2012/13 is £10,600. The first £10,600 of gains is exempt from tax. You are then liable for 18% or 28% tax dependent on your total taxable income. If you have sold assets and made losses, these losses can be offset against gains made or can be carried forward to future years.
An annual gifts exemption is available of £3,000 per donor. If you did not use your £3,000 exemption in the last tax year, you may gift up to £6000 in the current year. Unlimited small gifts of £250 per donee can be made. Making use of these exemptions can reduce the size of your estate.
Individual Savings Accounts (ISAs)
The maximum that can be invested in a Stocks & Shares ISA is £11280 for the tax year 2012/13. The maximum investment permitted in a cash ISA is £5640. The remaining balance can be used to fund a Stocks & Shares ISA. The limit for 2013/14 is £11520 with the maximum for a cash ISA being £5760.
Junior Individual Savings Account (JISAs)
The maximum that can be invested in a JISA for tax year 2012/13 is £3,600. This can be split between a cash JISA and a Stocks & Shares JISA.
Venture Capital Trusts (VCTs)
The VCT scheme is designed to foster investment in small, high risk trading companies enabling them to develop and grow. Therefore VCTs may only be appropriate investments if you have an adventurous attitude to risk in respect of some of your capital. The maximum allowable investment in a Venture Capital Trust is £200,000 in any one tax year. Income tax relief is available at a rate of 30% if the VCT is held for at least five years (limited to the amount of income tax payable for the year or £60,000). All dividends and capital gains are tax-free. These tax advantages and the initial relief are conditional on the VCT being held for five years.
Enterprise Investment Schemes (EIS)
The Enterprise Investment Scheme is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in these EIS companies. The minimum investment is £500 in any one EIS qualifying company per tax year. Upfront
income tax relief of 30% up to a maximum investment of £1 million is available. If the EIS investment is held for at least three years, there are five separate tax advantages:
• 30% upfront income tax relief on the amount invested for current tax year up to a maximum investment of £1 million. (Investors in EIS can carry back up to £500000 of their investment to tax year 2011/12 for the purposes of income tax relief. This does not affect an individual’s current tax year entitlement.)
• The payment of tax on a capital gain can be deferred where the gain is invested in shares of an EIS qualifying company. You can defer gains made up to three years previously or one year in the future (from the point at which the investment into the underlying company is made).
• All capital gains arising from an EIS investment are tax-free.
• Investments in an EIS are exempt from Inheritance Tax (IHT), providing the shares have been held for at least two years at date of death.
• Loss relief is available so that any capital loss, less any income tax relief given, on an investment can be set against income of the year in which they were disposed of, or any income of the previous year, instead of being set off against any capital gains.
Seed Enterprise Investment Schemes (SEIS)
The SEIS is designed to help small, start up companies raise finance by offering a range of tax reliefs to individual investors purchasing shares in those companies. It complements the existing Enterprise Investment Scheme (EIS). It is aimed at addressing the particular difficulties which start up companies face in attracting investment, by offering tax relief at a higher rate of 50% rather than 30% offered by the existing EIS. The maximum
investment is £100,000 each tax year. SEIS investment is for very speculative investors given the nature of the companies in which the SEIS invests.
The standard lifetime allowance is £1.5m. If your total pension pot is in excess of this figure at retirement, tax is charged on the excess at a rate of 25% if the excess is taken as a pension or at 55% if it is taken as a lump sum. From the 2014/15 tax year, the lifetime allowance is to be reduced to £1.25m. There will be protection arrangements in place for pension investors whose pension pot is likely to exceed £1.25m. However, action will need to be taken by 5 April 2014 to secure the protection. If you think you may be affected, we can help you work through on the options.
Tax relief is available on pension contributions up to the highest rate of tax an individual pays. The maximum contribution allowable for tax relief is £50000. The additional rate of income tax reduces from 50% to 45% from 6 April 2013. Therefore the net cost of making a contribution will increase
from 6 April 2013 so think about making a contribution before this date to benefit from 50% relief. Remember that the maximum allowable contribution for tax relief is reducing to £40000 from 6 April 2014.
It is possible to make use of unused allowances in the tax years from 2009/10. The unused allowance in each year is £50,000. Potentially contributions
of up to £200,000 can be made in the tax year by taking advantage of unused allowances in previous tax years. The total value of tax relieved contributions an individual can actually make during the tax year is restricted to 100% of relevant UK earnings.
Stakeholder Pensions are available for those working and not working as well as for children. The maximum contribution is £3,600 gross, so you pay £2,880 and HM Revenue and Customs will repay tax of £720