Tax-Efficient Savings & Investments
Adult savers can now invest up to a £15,000 per annum in an ISA or NISA in any combination of cash or shares. Only one cash NISA and one stocks and shares NISA can be held in each year so further contributions must be made into the same ISA or NISA.
Money held in stocks and shares ISAs opened during any tax year can now be transferred into a cash NISA which means that transfers from cash to stocks and shares ISAs and vice versa can be made as many times as the account holder wishes.
You must make your 2014/15 NISA investment before 5 April 2015 so should consider carefully now.
The tax free personal allowance for income tax is £10,000 for 2014/15 but this is rising to £10,600 from 6 April 2015.
It can be beneficial to employ a spouse or partner to help make the most of their personal allowance, whilst baring in mind the rules on income shifting and also considering the legal consequences of transfers. Please ask us if you are interested.
There is a risk that anyone with income over £100,000 could pay an effective rate of 60% on further income. However there are strategies, which we can advise on, to help reduce your tax bill such as delaying income until next year or increasing payments into a pension.
Tax Efficient Profit Extraction
Although each company and situation is unique, it is important to consider the business and tax implications of the options available.
To reduce a company’s national insurance bill a dividend could be taken rather than a salary or bonus. However a salary or bonus is usually a tax deductible expense for the company.
The timing of the bonus or dividend is also be important as the company or individual crosses the various tax limits.
There are also tax-free allowances which can be incorporated into your business, such as mileage allowances or paying employer pension contributions to reduce taxable profits.
All of the options above require careful thought, planning and expert advice.