Tax-year end planning opportunities can often be overlooked and in this period of volatile markets there is clearly a need to maximise these where possible. TYE planning can add real value for all concerned.
Pension contribution of £3,600 (gross) for non-working spouse/civil partner*, children or grandchildren who will receive tax relief of 20% in the current tax year.
Pay personal pension contributions of up to 100% of earnings to benefit from up to 40% relief.
Pay pension contributions to offset against realised life policy gains or capital gains in the 2008/09 tax year.
Use salary sacrifice where employee and employer national insurance savings can be applied to pension contributions.
Investments planning
Maximise Individual Savings Account (ISA) allowance - currently £7,200 per person per annum can be invested with no personal liability to income tax and capital gains tax (CGT).
Realise capital gains to maximise use of the £9,600 CGT annual exempt amount (trustee's allowance is £4,800).
Register any capital losses with HMRC to carry forward and offset against gains arising in future tax years.
Assign assets to a spouse/civil partner* paying a lower rate of income tax, or with unused allowances, before realising life policy and capital gains.
Maximise use of the inheritance tax (IHT) exemptions including the annual exemption of £3,000 per individual, which can increase to £6,000 if last year's allowance has not been used (£12,000 for a married couple).
Review existing life policies (especially protection policies) and see if they should be written into trust, as millions of pounds are paid unnecessarily in inheritance tax on these types of policies every year.
Consider gifting surplus income to reduce any existing IHT liability. Income from drawdown for example is deemed 'real income' for these purposes.
Consider gifts to trust to start reducing IHT liabilities. Where combining different trusts ensure the correct order is used and trusts are created on different dates where required.
Ensure suitable wills are in place and effective use of available nil-rate bands is achieved.
Review the existing IHT position for surviving widows, widowers and civil partners whose estate on death may not have utilised their nil-rate band in full or part.