End of year tax tips

Posted on: 03 April 2009 by Gareth Hargreaves

There are just days to go before the tax year ends on 5th April, so get moving with our last-minute tips to cut your tax bill and boost your savings.

tax allowance tipsBritish taxpayers will waste over £10bn in unnecessary tax in 2009 according to independent financial advice trade body unbiased.co.uk.

But with the end of the fiscal year rapidly approaching millions of Brits still have time to curb their bills if they make the most of the reliefs available to them prior to 5th April.

1) Pensions

Pensions earn 20% tax relief. If you put in £800, the tax relief raises it to £1,000.

Higher-rate taxpayers can claim back a further £200 through their tax return, so they can boost their pension savings by £1,000 for a cost of £600. Non-earners can put £2,880 into a pension and have this boosted to £3,600.

2) ISA’s

You can put up to £7,200 into Isas. Up to £3,600 can go into a cash Isa and earn tax-free interest; the rest (between £3,600 and £7,200) can go into an investment Isa.

Top cash Isa rates are around 3.5%, meaning you would earn £126 on £3,600 over the year.

3) Inheritance Tax

You can give away up to £3,000 in total per tax year to as many people as you wish without it affecting your estate. A couple can give away £6,000.

If you haven't used last year's exemption, you can use it this year, making a total of £12,000 for a couple. You can also give away any number of sums of £250 a year.

4) Capital Gains Tax

For those lucky enough to have made a profit on investments, you can sell now and deduct your personal CGT allowance of £9,600 from the gain before paying tax at 18% on the rest.

More likely, if you've made a loss, Ian Miles, of accountants James Cowper, says you can set it against any future gains by registering it on your tax return.

5) State Pension Top-Ups

Buy back missing years in your National Insurance contributions to enhance your state pension. Currently, it costs £421.20 a year, compared with £626.60 after 6 April.

Check with the Pension Advisory Service whether it's worth you doing this on 0845 601 2923.

6) Juggle Your Finances

Couples where one is a non-taxpayer or in a lower tax bracket should move savings and investments into the name of the person paying least tax. You can earn £6,035 before you pay tax this year, £9,030 for those aged 65 to 74, and £9,180 for those aged 75 and over.

7) Savings

If you don't pay tax, make sure you fill in form R85 so that you don't have 20% tax automatically deducted from your savings by the bank or building society which holds your account.

If you earn less than £8,355 (£6,035 plus £2,320), you are taxed only at 10% on savings, but you need to claim it back from the Revenue. Pensioners have higher tax allowances.

8) Out Of Work

If you lost your job this year and are still out of work, you are probably due a tax refund. Your personal allowance of £6,035 is divided into one-12th each month through Pay As You Earn (PAYE).

So if you lost your job in December, you will have received only nine 12ths of your allowance. Fill in form R40 to claim the balance.

9) Gifts

Make a donation to charity. Every £1 you give to charity through Gift Aid is increased to £1.25 by the Revenue for basic-rate taxpayers. Higher-rate taxpayers can claim additional tax relief on the gift through their tax return.

'Although you have to file your self-assessment tax return by 31st January next year, it relates only to gifts donated during this tax year,' says Mr Miles.

10) Check Your Tax Code

John Whiting, tax partner at accountants PricewaterhouseCoopers, says the tax code is a blunt instrument which doesn't always reflect our complex tax system accurately.

If you don't correct mistakes and HM Revenue & Customs decides you have underpaid this year, it can start clawing back the extra tax through PAYE from 6th April.

Do you have any top last-minute tax tips to pass on to other readers?

If so, let us know by leaving a comment in the box below or share your thoughts in the 50connect forums.

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