New tax year – are you prepared? – Richard Lishman
Featured Products Promotional FeaturesPosted by: Dental Design 11th May 2018
The new tax year is now underway, which can mean only one thing – it’s time for financial planning and to revaluate financial goals. For those of you whose 2017/18 tax year proved to be unsuccessful, the next 12 months will provide a chance for a fresh start and to make some changes. If instead you reaped the rewards of your investments and efficient tax planning, then the time between now and 5 April 2019 will be a good opportunity to take your financial objectives to the next level.
For best results this tax year you will need to consider the following: Are your current investments effective? Are you taking advantage of new financial products? Are you on top of your tax bill? Are you utilising all the tax relief options available to you? Are your financial records up to date? And, are you making the most of savings vehicles? The best-placed person to help with this is an Independent Financial Adviser (IFA), as they can both evaluate your current position and assess the best way to approach the new tax year. A long-term plan can then be implemented and adjusted accordingly over the course of the year rather than being left to the last minute, which is much less stressful and far more conducive to achieving good results.
Before you get started, here are some of the key tax changes that came into effect on 6 April that you may need to be aware of. If any of the following are likely to affect you and your financial planning and future objectives, be sure to seek guidance.
Inheritance tax
On 6 April 2017, a new ‘main residence’ band of £100,000 was introduced to allow direct descendants to inherit estates worth a greater value without incurring inheritance tax. That took the total allowance that can be passed on to £425,000 for singles and £850,000 for couples. This ‘main residence’ allowance has now increased to £125,000 making the maximum that can be passed on to direct descendants £450,000 and £900,000 respectively. By 2020, the tax-free amount will be £500,000 and £1 million. When making future arrangements for your loved ones, be sure to takes these increases into consideration.
Pension lifetime allowance
It might not affect you at this moment in time, but it’s worth noting the increase to the lifetime allowance to £1,030,000 from £1 million. Indeed, if pension planning is high up on your priority list, this change presents an opportunity to increase your payments.
Dividend allowance
It’s been a while coming (and it nearly didn’t happen at all) but the dividend allowance has now been reduced from £5,000 to £2,000. If you own shares in a company or pay yourself dividends through your own limited company, then this change will affect you, although to what extent will depend on which tax band you fall into. For a portfolio of £75,000 with a dividend income of £3,000 the estimated cost to a higher-rate taxpayer will be £325 more a year and £381 for additional rate taxpayers, according to figures. As for a portfolio valued at £125,000 with a dividend income of £5,000, it is predicted that a higher rate taxpayer will need to pay £975 extra tax a year, and for an additional rate taxpayer, £1,143.[i]That’s only a rough estimate, however, and will vary depending on how much you choose to top up your earnings with dividends. You will need to speak to an expert adviser for a more accurate assessment of your personal situation, and depending on the outcome, it may be that you need to revaluate the way in which you pay yourself.
Business rates
Planned cuts to business rate rises were brought forward by two years to April, and will now rise in line with the lower Consumer Prices Index (CPI) measure of inflation rather than the Retail Prices Index (RPI). This is part of the Chancellor’s aim to reduce some of the pressure on small businesses and should hopefully help to reduce overheads.
Get started
Above are just some of the changes that have come into effect. For a full assessment of taxation that will impact your tax bill and help with financial planning – including rebalancing your investment portfolio – contact the team of reliable IFAs at money4dentists.
The tax year may only have just begun, but there’s no time like the present when it comes to sorting your tax bill and managing your finances.
For more information please call 0845 345 5060, email info@money4dentists.comor visit www.money4dentists.com
[i]The Guardian. Budget 2017: tax on dividends will be a raid on 2 million small investors. Published 11 March 2017. Accessed online March 2018 at https://www.theguardian.com/money/2017/mar/11/budget-tax-on-dividends-raid-small-investors
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