SPECIAL REPORT | December 2023 | Year End Financial Planning 8 ● Once held for two years, investments in EISs and SEISs are usually outside of an individual’s estate for IHT purposes. ● Income tax relief for investment in newly issued shares in venture capital trusts (VCTs) is 30%. Normally gains are exempt from CGT and dividends free of income tax. VCTs are investment trusts that invest in relatively small trading companies. REVIEW YOUR INHERITANCE TAX PLANNING Most inheritance tax (IHT) planning is not related to the tax year end, but this is as good a time as any to review your will. IHT is payable if a person’s assets on death, plus gifts made in the seven years before death, add up to more than the nil rate band, which is currently £325,000. A residence nil rate band of £175,000 may also be available where a residence is left to direct descendants. Lifetime gifting is a way of reducing the value of your estate. Gifts totalling up to £3,000 in a tax year are exempt from IHT. If you didn’t use this exemption in 2022/23, you can make IHT-free gifts of up to £6,000 before 6 April 2024. If you have already used your exemption for 2023/24, you could delay your next gift until after 5 April 2024 to take advantage of the 2024/25 exemption. Useful link: www.gov.uk/inheritance-tax – HMRC guide to IHT. CHARITABLE GIVING You can get tax relief for any gifts to charity if you make a gift aid declaration. You make the gift out of your taxed income and the charity benefits by claiming back basic rate tax on the value of the gift. Higher and additional rate taxpayers can claim an extra 20% or 25% in relief. Intermediate, higher and top rate taxpayers in Scotland can claim an extra 1%, 22% or 27% in relief, respectively. You can obtain both income tax and CGT relief on gifts to charities of shares listed on the stock market and certain other investments. Gifts to charity are free of IHT, so remembering a charity in your will can reduce the total amount of IHT that will be paid on your estate. If at least 10% of your net estate is left to charity, then the rate of IHT payable will be reduced from 40% to 36%. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate will writing, tax and trust advice and certain forms of estate planning. The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Planning point ISAs have always been valuable for those who can afford to regularly invest the annual maximum and consequently build up substantial tax-free savings. Now, with the CGT annual exempt amount and the dividend allowance both falling next tax year, they are becoming more attractive to those wishing to set aside smaller regular or ad-hoc sums. Greater flexibility will be introduced from April 2024, which will include allowing partial transfers of ISA funds in-year between providers and in-year contributions to multiple ISAs of the same type from different providers. CHECKLIST ●Could you transfer savings or investments to your partner to minimise tax payable at the higher rates next tax year, to maximise use of the personal savings and dividend allowances, or to avoid losing your personal allowance or child benefit? ●Have you considered the timing of dividends and bonuses to minimise tax payable? ●Have you used your CGT annual exempt amount by making any available disposals before the tax year end? ●Are you investing enough in your pension (or possibly a lifetime ISA) if you wish to, or have to, retire earlier than state pension age, which is likely to keep going up? ●If you are aged over 55, have you taken advice about the options for drawing your pension savings? ●Have you used this year’s ISA allowance and made any other tax-efficient investments before 6 April 2024? ●Have you made gifts to use your annual IHT allowances?
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