End of tax year ‘To-Do’ checklist

The tax year end is upon us and this year the deadline is effectively 1^st April  given that the tax year end falls on Easter weekend. So time is almost up for those tax year sensitive tasks. To help you all I have compiled an ‘End of Tax Year’ checklist as an aide-memoire.

The end of tax year obviously is of particular significance when managing your finances and investments and offers planning opportunities for each individual. The below checklist is not meant to be exhaustative but rather a memory jog of the key planning areas which might be achievable this late in the day. So pen at the ready…..…..

1. Retire – Under current legislation, you can start taking an income from your pension fund when you reach 50. However, on 6 April 2010, the minimum pension age will increase to 55. This has major implications for those who are currently aged between 50 and 55 and is covered in my previous here.
2. Pay into your pension – The merits of pension saving will be covered in a future money tip. But in short pensions offer a tax efficient way to invest for your retirement. Not only do the funds within a pension grow tax-free but any contribution you make into the plan receive income tax relief at your highest marginal rate. So in simple terms if a basic rate tax payer pays £80 into his pension the tax-man tops this up to £100. Similarly for a higher rate tax payer a £100 contribution into his pension fund actually only costs him £60. However, while this seems a great deal, which it is, the trade of is that you won’t be able to access your pension fund until you are 55 and even then only 25% of it can be taken as a tax free lump sum. The rest has to be used to provide you with a retirement income. The tax-year end sensitivity comes from the annual limits placed on the amount you can put into a pension fund.  More details can be found here on the FSA website. But people who earn over £150,000 a year need to be careful as anti-forestalling measures announced by the Government have limited the amount of tax relief you will receive on your contributions.
3. Pay into your spouse’s pension – even non-earners such as housewives can get tax relief on pension contributions. A non-earner can pay £2,880 each tax year into a pension and receive an additional £720 from the tax man (effectively free money!). So bringing their total gross contribution up to £3,600. Again, this will be covered in more depth in a future money tip.
4. Use you annual ISA allowance - Click here to see my previous post covering using your ISA allowance. In addition, check out my post Money tip #28 – How to beat the ISA deadline and save money (even if you haven’t decided which funds to invest in).
5. Utilise your CGT allowance – If the value of your investments have increased enough during the current tax year to exceed the capital gains tax allowance of £10,100, you may want to consider selling enough of your units or shares to use that allowance. This will help you reduce any tax liability which is currently charged at 18%.
6. Reduce you Inheritance Tax (IHT) bill – there are a number of annual IHT allowances which are tax year sensitive. By using them you can reduce any potential IHT bill payable on your death. Each tax year you can:
   • give away £3,000 of your capital, and if you don’t make use of your exemption in one year you can carry it forward to the next year, for one year only.
   • make gifts of up to £250 a person (although this cannot be used in conjunction with any other inheritance tax allowance).
   • give away £5,000 to a child who is getting married.

There are other ways of giving money away and reducing your IHT bill but theses are not tax year sensitive and will be covered in a future post

As always you should seek financial advice if you are unsure as to the suitability of an investment or a course of action.

So there you have it. The current tax year is almost over and while I busy myself with my clients please feel free to leave a comment if you have found this or any other post on this blog useful. And why not refer a friend.