Let's get personal - It's the year-end

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It will soon be time for accountants and tax consultants to link arms and sing Auld Lang Syne with gusto and New Year promises can be made to be broken yet again. Blame it on the clients.

However before we reach the tax year end we should offer a year-end review to our personal tax clients. Sometimes this will run in conjunction with a business year-end one as well. I always believe that it should not only look at the tight timeframe leading up to 5th April but should look back over the course of the year as well as projecting beyond the present tax year itself.  Below I share a quick summary of some of things I would take into account when carrying out a review. The importance of each one won’t be dependent on me but on the circumstances regarding my client

1. I would look at the personal goals and aspirations which my client has set and see where we are on the road to reach those goals and whether or not they need tweaking due to a change of circumstances.

2. Has there indeed been a change to their situation? Perhaps, for example, they have got married/divorced, received an inheritance, a child or grandchild has been born, found they’ve got an incurable illness. I would want to revisit their wills, assuming they have one of course! I would suggest in some cases, looking at putting powers of attorney in place. If they have married I would want to consider whether a CGT election needs to be made where each partner owns a residence prior to marriage. If sadly the couple had separated in this tax year I would tactfully advise about transferring assets between them before the end of the tax year.

3. Marriage is a wonderful thing so my wife keeps telling me. So is it beneficial and feasible to transfer the marriage allowance over from one spouse to the other? Can I go back four years with that claim? Is it feasible to even up the income between the couple, especially where one of the individuals is a higher rate taxpayer and/or is affected by the high income child benefit tax charge or their personal allowances are being tapered or they are affected by the pension tax charge?

4. From an inheritance tax viewpoint, has the individual made use of the £3000 annual gift allowance (£6000 if nothing was done in the previous tax year)? Is the client’s capital base growing perhaps because he/she is not fully utilising their income? Is this the time to set in motion regular gifts out of income?

5. What is their pension position? Do they have any unused pension allowance available? Is some of that allowance about to drop out of the equation come 5th April? Could the client be caught by the pension tax charge? Can that be mitigated perhaps, for example, by way of a relief at source pension contribution or a gift aid payment? Is the client approaching the date they will be in receipt of a state pension? Is it worth deferring until a later date perhaps because they don’t need it just yet or maybe because they would be taxed on it at a higher rate than in the future?

6. If the client has children have they considered setting up a stakeholder pension for them? Is it worthwhile contributing into a help to buy ISA/Lifetime ISA or a Junior ISA, perhaps by way of regular gifts out of income? Do the parents pay for registered childcare? If so are they aware of the Tax Free Childcare (TFC) Account? If they are in the old childcare voucher scheme arrangement is it wise to jump to the TFC account? Should one of the parents at least register for child benefit to ensure that year counts as a relevant one for state pension purposes and to maximise any future claim for it even if one of them is above the £50K income limit.

7. Has the client utilised their capital gains tax annual exemption for this year? If not is it possible to ‘bed and breakfast’ with the help of their spouse thereby increasing the base cost of the asset on future sale? Does the client have a capital loss in this year which would be wasted if a subsequent gain is made prior to the tax year end? If so is it worth delaying the pregnant gain sale until after 5th April?   

There are many other considerations to take into account but that will do for now.

ProActivTax Half Day Tax Events

We are coming to an end of our series of half day tax events in March covering off a range of tax topics with a guest speaker in tow. Our final venues are Gloucester on 20th March and Southampton on 21st March.

Why not come along and see us. The cost is only £45 + VAT and is CPD certificated. click here if interested.

ProActivTax help accountants across the UK

ProActivTax was set up to help accountants around the UK to develop their tax offering to their existing client base and to build up their tax profile within their local community and beyond.

We do this through tax resources (such as the Year-end review resource for individuals, ARQ and the Pension Allowance calculator), tax marketing, tax specialists, tax training/webinars/seminar programmes and us.

If you would like to find out more please click here to access my online diary or simply drop me an email with some provisional dates and I’ll set up a conference call.

Paul Flynn

Email: [email protected]

Tele: 01246 488 200

Mobile: 07903 799091

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ProActivTax Ltd (09540555) 7 Midland Way, Barlborough. Derbyshire. S43 4XA