New Year, New Plans & Resolutions

New Year Plans

In January we tend to think about New Year’s resolutions along with reflect on the previous year and plan out what we want to achieve for this coming year along with book a holiday! January is also a good time to start planning your tax affairs before the end of the tax year on 5th April.

An obvious tax planning point would be to maximise your ISA allowances for the 2018/19 tax year (currently £20,000 each) and you might also want to consider increasing your pension savings before 5 April 2019 as the unused annual pension allowance is lost after three years.

Pension planning

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers contributions by both the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there are rumours that this relief may be reduced in future. 

Increased capital allowances start 1 January 2019

The Chancellor announced a temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery to £1 million from 1 January 2019. However transitional rules mean that the full amount will not necessarily apply to your business straight away.

New capital allowance for commercial buildings

The Autumn 2018 Budget announced a new 2% straight line tax deduction for the cost of construction or renovation of commercial buildings and structures. HMRC have now issued a technical note setting out the details for the operation of the new relief.

Unlike the old Industrial Buildings Allowance the new relief is available for the construction of shops and offices as well as factories and warehouses.

The new tax break is available where the contract is entered into and construction costs are incurred on or after 29 October 2019. The allowance is available to commercial property landlords as well as trading businesses. There are special rules for leasehold buildings, which determine whether the landlord or tenant is entitled to the allowance.

There are more generous plant and machinery allowances available for fixtures and fittings within the building and we can work with you to help you maximise tax relief. The AIA referred above would mean that there may be 100% capital allowances for equipment such as central heating and air conditioning. 

Advisory fuel rate for company cars

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 December 2018. Where there has been a change the previous rate is shown in brackets.

Engine Size Petrol Diesel LPG
1400cc or less 12p

 

  8p

(7p)

1600cc or less   10p  
1401cc to 2000cc 15p   10p

(9p)

1601 to 2000cc   12p

 

 
Over 2000cc 22p

 

14p

(13p)

15p (13p)

Note that for hybrid cars you must use the petrol or diesel rate.

You can continue to use the previous rates for up to 1 month from the date the new rates apply. 

Passing on the family home

New inheritance tax rules for passing on the family home started on 6 April 2017. This additional relief should be taken into consideration when drafting your Will.

From 6 April 2017 an additional nil rate band of up to £175,000 is available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band.

This additional relief is however restricted If your assets exceed £2 million. The rules are fairly complicated and need to be looked at on an individual basis.

This additional inheritance tax relief is available even when you downsize to a smaller property.

For example if a married couple currently live in a large house worth £500,000 and downsize to a flat worth £250,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.  They could even sell up completely and move into a rental property and still get the inheritance tax relief!
We recommend that you seek the advice before making any tax planning decisions to ensure you have a tax plan that suits you get in touch or call 0161 249 5040