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Danby Bloch: Preparing for the most important tax year-end yet

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Seldom has year-end tax planning been more essential. Not only is it reassuring in times of market turbulence to be able to give clients some guaranteed wins in the form of alpha from tax planning but this is also a time of momentous change, meaning the decisions made before 6 April could have a major impact on life after that date. So here is a checklist of some of the most pertinent things to be thinking about this year.

Dividend tax

2016/17 is the first year of the dividend tax, adding 7.5 per cent to the cost of dividends for all taxpayers but with the first £5,000 free of tax. Clients that run small companies should be considering taking bumper dividends before 6 April to avoid the extra 7.5 per cent tax next year.

Be ready for some listed companies to bring forward dividend payments to before 6 April. It could distort some clients’ tax positions in the current year.

Income planning

Suggest that clients rearrange their family finances to make the most of their various tax allowances and reliefs, as well as lower tax bands. It may be too late to have a big impact on the current tax year for all clients but now is the time to get income sources sorted for the start of the next year. The areas tax savings can often be achieved include:

  • Making sure everyone – spouses/civil partners, children and others – is using their personal allowances.
  • Transferring assets that generate income where one family member has income this year of between £100,000 and £121,200 subject to the effective 60 per cent tax rate caused by the withdrawal of the personal allowance by £1 of every £2 of income over £100,000.
  • Manipulating income to make the most of the new £1,000 savings allowance coming in next year (£500 for higher rate taxpayers).

Savings income

There is also the nil starting rate of tax on the first £5,000 of savings income, which does not kick in if non-savings income is more than the savings rate band. A surprising number of clients and their family members may qualify for this valuable tax break. Take a look and remember that offshore bond profits count as savings income.

Buy-to-let property

Lots of clients have this type of investment but the Chancellor has them in his sights. The first tax privilege to go will be the 10 per cent wear and tear allowance from 6 April, so remind clients to claim this relief for the current year.

Capital gains tax

Clients may well have realised some taxable gains this year, on which their tax rate could be as high as 28 per cent. Recent turbulence in the markets has generated some losses and it is worth looking to see if these can be used to minimise the incidence of the higher rate of capital gains tax.

Obviously, it almost always makes sense for clients to use their annual small exempt amounts to realise taxable gains.

Bed-and-Isa or bed-and-pension or bed-and-spouse can all be good ways to retain investments while realising losses or gains.


Of course, the big news this year is pensions. The main issue is to make use of the £80,000 annual allowance in its last year. The changes in the July Budget complicate the rules by dividing the year into two input periods, so watch out. But next year, the annual allowance effectively drops to £40,000 and for people with high incomes – essentially starting at £150,000 or £110,000 income plus pension contributions – this level of annual allowance will be tapered down to £10,000.


Considering the dividend tax, Isas look even more enticing for many investors, especially now the annual limit of £15,240 allows individuals and couples to save significant amounts into a tax free zone.

The new Help to Buy Isa can provide an ideal opportunity to save for a first property purchase. Individuals over the age of 16 can put down an initial £1,000 plus £200 a month and the Government will add up to £3,000 of tax free bonus. It will not be enough to pay the deposit on many properties but it could be a useful exercise for thousands of Banks of Mum and Dad.

Tax relieved investments

When it comes to Enterprise Investment Schemes, Seed EISs and venture capital trusts the limits are so high and there is scope for carry-back of relief, so the year-end deadlines are generally less of an issue.

Danby Bloch is chairman at Helm Godfrey


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