At this time of year we are normally more interested in making sure that we keep warm and dry than anything else, but believe it or not spring officially begins with the vernal equinox on March 20 at 12:57 P.M. only five weeks away!

Whilst this welcome movement from winter to spring is a time of joy for most, it also pre-empts the end of the 2013/2014 Tax Year, traditionally the busiest time of the year for those of us involved in financial services. This is because we aim to ensure that, wherever possible, our clients take advantage of the numerous tax allowances available to them, especially when some are being scaled back.

To encourage all clients of James & George Collie to take action, here are just some of the allowances we feel everyone should try to take advantage of:

Nil Rate Band of Income Tax

This year every individual has a maximum Nil Rate Personal Allowance of £9,440. If you don’t have taxable income of this level, or are married to someone who hasn’t, then this presents an opportunity to limit your Income Tax liability from income such as dividends from shares and investments, bank/cash account interest, and rental income from property.

Capital Gains Tax Annual Exemption

The current Capital Gains Tax (CGT) Annual Exemption is £10,900. Even if you don’t require capital from your investments, we encourage our clients to realise gains up to this allowance and therefore reduce potential future CGT liabilities, which could be as much as 28% for Higher Rate Tax payers.

In addition, if you have losses from the disposal of any assets in the tax year then make sure to properly document them and retain the evidence for use in future tax years.

Inheritance Tax Annual Exemption

Every year each individual can gift a total of £3,000 to whoever they wish, without it being potentially liable to Inheritance Tax (IHT). We therefore suggest that all clients take this opportunity to reduce a potential future tax on their assets on death of 40%.

Also, it should be remembered that it is possible to use up to one year’s unused exemption from a previous year. This means that a married couple could gift up to £12,000 in the current tax year.

You should also note that it is possible to give as many small gifts of up to £250 as you like.

ISA Allowance

Every year it is important that you utilise your ISA Allowance, currently £11,520, to maximise the tax efficiency of your investments.

Even if you can’t afford to invest additional capital, it may be possible for you to use the CGT Annual Allowance to realise gains from another investment to switch capital to this most tax efficient of investment vehicles, without incurring any immediate tax liability.

Pension Annual Allowance

For most clients the use of the full £50,000 Annual Allowance for pension contributions is perhaps beyond them, but for those that have the ability to make contributions up to this level, the use of this allowance is a vital part of their financial planning. This is especially true this year as from the 2014/2015 Tax Year this Annual Allowance is reducing to £40,000.

However, it may be that some individuals will need to actually consider reducing their pension contributions, as this scaling back of the Annual Allowance could lead them to being subject to a tax charge. This is also being compounded by the Lifetime Allowance for pensions, or the total pension holding someone can have before paying a charge, reducing from £1.5M to £1.25M.

If you think you may be affected by these changes then we strongly suggest you contact us to discuss your situation.

Apart from the above, there are possibly numerous other allowances, exemptions and reliefs that you could be utilising each year to reduce, minimise or even eliminate tax liabilities now or in the future.

James & George Collie Financial Management will be delighted to help you undertake any of your tax and financial planning this year. Please contact Scott Middleton on 01224 563305 or by email (This email address is being protected from spambots. You need JavaScript enabled to view it.)

- remember you need to………….

Use it, or lose it!!