Five Essential Tax Tips for 2013/14

Following the dawn of a new tax year on 6 April 2013 here are five tax tips to get the most out of your tax allowances this tax year:

  1. ISA Allowance – Each year every individual in the UK receives an ISA allowance; for 2013/14 this allowance is £11,520 (up to £5,760 in cash). The sooner you take advantage of this allowance the sooner you can start earning tax free interest on your savings.
  2. Child Benefit Tax Charge – Following the changes on 7 January 2013, when an individual is earning in excess of £50,000 their entitlement to Child Benefit is withdrawn at 1% for every £100 over this limit until it is completely removed at £60,000 and above.  If you earn over £60,000 and have not already requested that your Child Benefit ceases, it would be advisable to stop your child benefit now to avoid a tax payment shock next year.
  3. Personal Allowance – The increase in personal allowance to £9,440 introduced in the Budget this year increases the amount an individual can earn before being subject to income tax.  This increase means that a basic rate taxpayer will pay £267 less tax each year.  It is important that you check your PAYE code if you are employed to ensure you are receiving this increased allowance; you should expect your tax code to be 944L on your payslip, unless you are aware of any deductions or additional allowance.
  4. Annual Investment Allowance (AIA) – The AIA limit was increased on 1 January 2013 from £25,000 to £250,000 on qualifying asset purchases, providing 100% tax relief within the limit to reduce taxable profits.  Careful planning to ensure purchases qualify and the timing is correct will enable businesses to make the most of this increased allowance.
  5. Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) & Venture Capital Trusts – If you are looking to invest this year, now may be the time to look at alternative investments.  Each of these schemes has no minimum limit and all offer an income reducer which could significantly reduce your tax position.
  • EIS – Maximum investment £1m, income tax relief at 30% of cost of shares
  • SEIS - Maximum investment £100,000, income tax relief at 50% of cost of shares
  • VCT - Maximum investment £200,000, income tax relief at 30% of cost of shares

By taking a pro-active approach to your finances at the start of the new tax year it is much easier to make sure you take advantage of the reliefs available to you.  If you wait until the tax year draws to a close on 5 April, you may not be fully benefiting from the allowances that have been available to you for the previous 11 months, and you will be less likely to utilise all the planning opportunities available to you.

Steven Metcalf, Business Services Manager

 

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