BlogTuesday 6th March 2018
6 actions to save tax before 5 April
Make pension contributions
This is really tax efficient, as you get tax relief on any money you put in at the highest rate of income tax that you pay. For company owner-managers, the company can make contributions direct to your personal pension, saving 19% corporation tax.
Use your ISA allowance
ISAs allow you to save or invest and pay no tax on the income you receive (like interest, dividends and capital gains). Some ISAs will also give you a 25% government bonus. Using your maximum allowance of £20,000 for this year, you can save in a Cash ISA or Lifetime ISA, or invest in a Shares ISA or Innovative Finance ISA (peer to peer lending). You can even save for your first home with a Help to Buy ISA – find out more here
Use your Capital Gains tax exemption
Sell assets before the year end and keep your gain under £11,300 – this is will ensure that no capital gains tax will be payable.
Make use of the £5,000 dividend allowance and issue dividends to ensure each shareholder takes advantage of it. You can also transfer shares to a spouse – this will allow them to take advantage of the £5,000 dividend allowance too.
Keep your child benefit
If your income will be over £50,000 this year, child benefit will begin to be clawed back by the “high income child benefit charge” (even if it is paid to your spouse/partner). You can make additional pension contributions or gift aid contributions to reduce your “adjusted net income” to under £50,000 and keep all your child benefit.
Use your company to pay for childcare
Your company can pay directly for employees' childcare, up to £2,860 per year per employee. This saves corporation tax AND income tax on dividends, so a potential saving of £760 per year, or £1,520 if you and your spouse are employed by the company. This must be set up and in place before 5 April 2018, as the scheme closes to new entrants on that date.
**Update - the government has delayed the scrapping of the childcare voucher scheme. You can now still sign up until October 2018**