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The start of the new tax year may mean you want to start thinking about maximising reliefs available to minimise the tax at the end of the year.

Personal savings allowance

Your personal savings allowance allows you to earn up to £1,000 in interest from your savings each year, without paying any tax. This is reduced to £500 for higher-rate taxpayers, and is removed altogether for additional-rate taxpayers.

The more you earn from other income, such as your wages or pension, the less your starting rate for savings will be.

 

Inheritance and the family home

No inheritance tax is deducted from your estate if you were to die and leave your home to your spouse or civil partner in 2019/20. If you pass it on to anyone else, such as a child or grandchild, it will be subject to inheritance tax if its value is above the threshold (£325,000) at the date of death.

An additional allowance called the residence nil-rate band, which increased to £150,000 in April 2019, is available in certain circumstances. It works on top of the £325,000 basic nil-rate band when passing on the family home to your children or grandchildren, or other direct descendants. You may be able to pass on the family home worth up to £475,000 – £950,000 if you are married or in a civil partnership – in 2019/20 without your estate being liable for inheritance tax.

A number of conditions apply, so be sure to seek professional advice

 

Pensions

The annual pensions allowance enables you to contribute up to £40,000 in 2019/20, while you can also utilise any unused allowance from the last three tax years of an existing pension scheme. If your adjusted income exceeds £150,000 in 2019/20, your annual allowance will be reduced by £1 for every £2 that exceeds this threshold down to a limit of £10,000. You will retain your entire allowance if your threshold income is lower than £110,000 in 2019/20.

However, if you have withdrawn any flexible benefits, the money purchase annual allowance of £4,000 will apply instead of the annual allowance. The total amount you can save into a pension over the course of your life increased to £1.055 million for 2019/20, although your pension will trigger an extra tax charge if exceeds this.

 

Annual Investment Allowance (AIA)

Businesses will be able to claim £1 million as AIA for expenditure incurred between 1st January 2019 and 31st December 2020 on fixed assets such as plant and machinery.

 

Rent a Room Scheme

Under the Government’s rent-a-room scheme, you can continue to earn tax-free income of up to £7,500 a year from letting out a furnished room in your home.

You can opt into the scheme if you earn more than this amount from renting a room and want to claim the allowance, although it may be more tax-efficient to deduct expenses from such income. This also includes renting out your spare room through Airbnb, so you could take advantage of the allowance by letting a room in your main home to holidaymakers over short periods of time.

The relief is halved if you share the income, for instance, with your partner. If you let property that does not qualify for the scheme, a £1,000 property allowance applies instead.

There’s also a £1,000 trading allowance that applies to any income from trading, which could apply if you sell in small amounts on eBay or Etsy.

If you claim any of these allowances, you won’t be able to deduct any business expenses.

 

Effective tax planning makes a significant impact on how your business develops and thrives.  Talk to our Tax Planning team to dicuss the relevant tax planning options and reliefs available to you.