The next Eastbourne lunch will be on 22nd March 2019 12:00 PM – 2:00 PM at the Grand Hotel in Eastbourne, sponsored by Humphrey & Co - Book here
Book onto upcoming dates here:
- 22nd March 2019 - Book here
- 17th May 2019 – Book here
- 19th July 2019 – Book here
- 20th September 2019 – Book here
- 22nd November 2019 - Book here
New Year Resolutions to Save Tax
At this time of year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.
An obvious tax planning point would be to maximise your ISA allowances for the 2018/19 tax year (currently £20,000 each). You might also want to consider increasing your pension savings before 5 April 2019 as the unused annual pension allowance is lost after three years.
For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will.
For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings.
This limit covers contributions by both the individual and their employer. Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there are rumours that this generous relief may be reduced in the future.
Passing On the Family Home
New inheritance tax rules for passing on the family home came into being on 6 April 2017 in the form of an additional nil-rate band, known as the ‘main residence nil-rate band’. The availability of this additional relief should be taken into account when drafting your Will.
From 6 April 2017 this addition to the existing £325,000 nil-rate band is available on death where your home is left to your direct descendants such as children or grandchildren. This relief is being phased in between 2017 and 2020 and will result in up to £175,000 being available as a deduction for inheritance tax purposes by the 2020/21 tax year. In addition, like the nil-rate band, the main residence nil-rate band can be transferred to a spouse or civil partner. There are however restrictions to this relief if your assets exceed £2 million.
This additional inheritance tax relief is available even when you downsize to a smaller property.
For example if a married couple currently live in a large house worth £500,000 and downsize to a flat worth £250,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell up completely and move into a rental property and still get the inheritance tax relief!
Our Trust & Estate team can provide you with further information on this potentially valuable relief. They can also assist with your Will and at the same time consider the availability of reliefs as part of a review of your potential inheritance tax liability.