Happy New Tax Year

The 6th of April is here again, and as we look forward to a new tax year I thought I'd share a collection of quotes from famous names on the subject of tax.

Rob Knauerhase
Isn't it appropriate that the month of the tax begins with April Fool's Day and ends with cries of 'May Day!'?

Albert Einstein
[on filing tax returns] This is too difficult for a mathematician. It takes a philosopher.

Winston Churchill
There is no such thing as a good tax.

John Maynard Keynes

The avoidance of taxes is the only intellectual pursuit that carries any reward.

Plato 
When there is an income tax, the just man will pay more and the unjust less on the same amount of income.

Albert Einstein
The hardest thing in the world to understand is the income tax.

Winston Churchill
We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Calvin Coolidge
Collecting more taxes than is absolutely necessary is legalized robbery.

  

Will Rogers

The difference between death and taxes is death doesn't get worse every time Congress meets.

Roger Jones
I guess I think of lotteries as a tax on the mathematically challenged.

Mark Twain
The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.

Hope the New Tax Year brings you success and prosperity in 2012/13!

Year end tax planning 2011/12

The end of the tax year is looming large, so if you want to make the most of your annual tax-free allowances, you'd better get a move on.  Sorting out your finances now is essential, especially as there are some important changes coming into effect at the start of the new tax year.

Personal Allowance

Everyone in the UK is entitled to earn a certain amount of income each year before paying tax, this is the personal allowance. This tax year, we each have a personal allowance of £7,475, with higher allowances available to those aged 65 and above.  This increases to £8,105 next year.

If you are married and one partner is not working, it makes sense to transfer savings accounts to them, so that you pay less tax as a couple. You cannot carry your personal allowance forward to the next year if it is unused.

Individual Savings Account (ISA) allowance

ISAs allow you to save money free of income tax and capital gains tax. This tax year, you are allowed to put £5,100into a cash ISA, and the same amount into a stocks and shares ISA, or you can put the whole £10,200 allowance into stocks and shares.

From April, you will be able to invest £5,340 in a cash ISA, and £5,340 in a stocks and shares ISA. Alternatively, you can invest your whole £10,680 ISA allowance in stocks and shares. Any allowance not used by the April 5 deadline will be lost forever.

Top up your pension

For every £80 a basic-rate taxpayer put into their pension this tax year, the government will top it up by £20, so that the total contribution to your pension is £100. This is because you get basic rate tax relief on pensions at 20 %. Higher rate earners do even better because they can get up to 40 % tax relief, so £100 paid into a pension will only cost £60, and top rate taxpayers receive 50% on their contributions - that is £1 from the government for every £1they save.

From April, however, the maximum amount that savers can put into pensions and claim tax relief on will be reduced from £255,000 to £50,000. That means if you want to make a big lump sum payment into your your pension you'd do well to do so before the end of this tax year.

Inheritance Tax Planning

If you haven't done anything about inheritance tax planning, you should do so now. Currently, inheritance tax (IHT) is charged at 40% on anything you leave over £325,000 when you die.

Most importantly, you should write a will, making it clear who you want to leave your money and possessions to when you die. You may then want to try and minimise any potential inheritance tax bill by giving regular small gifts away.

You can give away a lump sum of up to £3,000 in each tax year without paying inheritance tax - known as your 'annual exemption', or £6,000 this year if you haven't used last year's allowance.

You can also give away surplus income totally free of inheritance tax, provided you can demonstrate that it is not affecting your standard of living.  The end of a tax year is always a good time to assess this position.

Reduce Capital Gains Tax

Capital Gains Tax is a charge that arises from the sale of assets, such as shares or buy-to-let properties, charged at18% for lower and 28% for higher-rate tax payers. Every individual has an annual capital gains tax free allowance, which stands at £10,100 for the current 2010/11 tax year.  The limit applies to each individual, so if you are married or in a civil partnership you each have an annual exemption.

Get advice

Tax planning can be complicated, so seek professional independent advice if you aren't sure of how to proceed.