Action before tax year end 5 April 2011

  1. For individuals with a "relevant income" of £130,000 or more (i.e. effected by the "anti-forestalling rules") for the 2010/2011 tax year, to make gross pension contributions to the value of £20,000 or £30,000, as appropriate (depending on pension contribution history) before 5 April 2011 to maximise higher rate income tax relief.
  2. For those currently affected by the "anti-forestalling rules" and are contemplating the making of a large pension contribution before 5 April 2011, there could be merit - depending on personal circumstances - to defer making part of any pension contribution to 6 April 2011 when an option to "carry back" contributions (within a £50,000 limit) to the previous three tax years will be introduced, thus providing an opportunity to maximise on any available higher rate income tax relief.
  3. The loss of a personal allowance for those with a taxable income in excess of £112,950 (an effective rate of income tax of 60% applies to income between £100,000 and £112,950). Try to mitigate this with pension contributions and, if relevant, charitable gift aided payments.
  4. Utilise Individual Savings Account (ISA) tax free allowance - £10,200 for 2010/2011.
  5. Remember the tax breaks available through Enterprise Investment Schemes (20%) and Venture Capital Trusts (30%) - but both are potentially very high risk investments. There is speculation that the generous tax breaks may be reviewed in the 2011 Budget.
  6. The IHT threshold has been frozen at £325,000. Where inheritance tax mitigation is an issue, remember the exemptions available, namely (i) £3,000 annual gift & the ability to carry back from the previous year if this has not been used, (ii) smaller gifts of up to £250 (but not to a recipient of a larger gift in point (i)) and (iii) gifts out of surplus income.
  7. Utilise Capital Gains Tax allowance - £10,100 for 2010/2011.

Tax planning in general terms applicable to 2011