Monthly Tax Idea - March 2013

Last minute planning before the end of the tax year

It’s still not too late to do some planning to optimise your tax position before the end of the tax year. Our end of year planning opportunities flyer gives lots of ideas. Here are a few other areas it pays not to overlook.

EIS: make sure of your shares 

  • If you have subscribed for EIS shares check to make sure that they have been formally issued to you.
  • Tax relief is available once the shares have actually been issued, not when you pay for them.
  • A letter of allotment is not the same as an issue of shares.
  • If you are unsure contact the issuing company to find out where your shares are.

Have you claimed back tax overpaid in 2008/09?

  • 5 April is the deadline for claiming back overpaid tax for the year ended 5 April 2009.
  • This applies to among other things:corrections to business accounts
  • gift aid relief not claimed
  • other corrections to returns, e.g. if you entered on the 2008/09 return interest that you did not receive until a later year.

Don’t sell EMI shares before 6 April if they don’t already qualify for entrepreneurs’ relief

  • From 6 April all EMI shares have the potential to qualify for entrepreneurs’ relief (ER).
  • There will be no minimum shareholding requirement (EMI shares only).
  • The one-year qualifying period runs from the date options were granted, not the date they were exercised.
  • These changes only apply to disposals on or after 6 April 2013.
  • If you work for a company which is likely to be sold before 6 April 2013 and will exercise your options at the time of sale, it may still be possible to benefit from ER but only with additional planning.

Look before you leave: residence rules are changing

  • The new statutory residence test will bring in major changes from 6 April 2013.
  • Being out of the UK on midnight on 5 April will no longer be as critical in many cases because non-residence will be measured over complete years but not always necessarily tax years.
  • “Split year” treatment will be available by right, not by HMRC concession.
  • This means that a person who wants to establish non-residence in 2013/14 will not have to have left the UK before 6 April in order to be sure of doing so.

Use the IHT annual allowance

  • The £3,000 annual IHT gift allowance is one of the most under-used reliefs.
  • You can also use any unused relief from last year to boost your IHT-exempt gifts by up to an additional £3,000.
  • And as Spring is the traditional time for celebrating weddings and civil partnerships, don’t overlook the chance for using IHT relief to make the event that little bit happier. This is additional to the £3,000 and the limits for gifts to or into trust for the couple are:£5,000 from a parent of either of the couple;
  • £2,500 from one of the couple to the other;
  • £2,500 from a remoter forebear of either; and
  • £1,000 from anyone else.
  • And if you want to make regular gifts, keep a note of your intentions and all payments, so that the exemption for normal expenditure out of income may apply too.

Top up your pension

  • A pension is still one of the most tax efficient ways to save.
  • If your income is in the band £100,000 – £116,210 your personal allowances will be withdrawn, with the result that you suffer a marginal rate of tax of 60%.
  • If your income is close to £100,000, it is worth doing some calculations now so you can make an additional pension contribution to avoid this penal rate of tax.

Avoiding the high income child benefit charge in 2013/14

  • If you or your partner are affected by the high income child benefit charge, and haven’t already opted out of receiving child benefit, you may wish to consider doing do.
  • The deadline for opting out to avoid the charge entirely in 2013/14 is 28 March 2013.
  • The opt out must be made by the person who receives the child benefit.
  • Consider opting out if your or your partner’s income exceeds £60,000.