End of year tax planning

David Hill INLT 45-099-PSB
David Hill INLT 45-099-PSB

Our tax rules get more complicated every year and as a result most people do not take advantage of the tax breaks on offer.

Unfortunately, most of the tax breaks are lost if not used by April 5 each year. As a result, March is a busy time for investors wanting to make the most of their tax allowances.

One of the least claimed allowances is the transferable personal allowance that was introduced last year.

Reports estimate that only eight per cent of eligible claimants have actually claimed the allowance. Another allowance that is often overlooked is the annual Capital Gains Tax allowance.

This allows investors to make a profit of £11,100 on the sale of shares and collective investment funds such as unit trusts or investment trusts.

This allowance is also lost if not claimed as it can’t be carried forward into the next tax year.

Any gain in excess of the allowance is taxed at 18 per cent, for basic rate and non-taxpayers, or 28 per cent for higher rate taxpayers. So, if you are holding investments that gone up in value since purchase, but you don’t want to sell them completely, there are several options.

Firstly, it is possible to sell the investment and buy it back the next day inside an ISA wrapper. Investment ISAs are totally exempt from Capital Gains Tax and are a great way to minimise tax.

The ISA contribution limit for this tax year is £15,240 per person, so a married couple can invest £30,480 between them. Secondly, it is possible to sell the investment and let another family member buy it back in their name.

Thirdly, a slightly different version of the investment can be bought back with the sale proceeds and fourthly, provided there is a gap of at least 30 days between sale and repurchase, the investment can simply be bought back.

Most investors with portfolios larger than £50,000 will have access to all of the above options without any cost if using one of the modern investment wrap platforms such as Ascentric.

These platforms, popular with most Independent Financial Advisers, can offer free trading of unit trust funds and have access to every listed investment.

David Hill is a Chartered Financial Planner and Independent Financial Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814 or by email: david@hillsfinancialplanning.co.uk