Action before tax year end 5 April 2011
- 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.
- 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.
- 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.
- Utilise Individual Savings Account (ISA) tax free allowance - £10,200 for 2010/2011.
- 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.
- 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.
- Utilise Capital Gains Tax allowance - £10,100 for 2010/2011.