The tax year end is fast approaching - if you are a doctor in Bristol - now is the time to start planning to maximise your tax allowances and reliefs. Here is our guide on what you should be doing now.
Make Use Of The Income Tax Personal Allowance
The standard personal allowance is £10,000 - which is basically the amount you can earn before you start paying tax. If you are a doctor with a partner or spouse who pays tax at a lower rate than you can consider moving assets into their name.
In addition, if you are a doctor affected by one or more of the main tax thresholds (higher rate, £100k+ therefore losing your personal allowance, child benefit or the additional rate tax threshold) you could consider making a pension contribution. A gross pension contribution could recover or reduce the loss of personal allowance or child benefit or reduce the tax paid at higher or additional rate. Be mindful of the recent pension caps though.
Make Use Of The Capital Gains Exemption And Any Losses
The capital gains exemption for this tax year is £11,000 meaning that a doctor can realise gains of up to £11,000 this year without paying any tax. If you are a doctor who holds assets (for instance stocks and shares) outside an ISA, you should consider realising the gains, using your capital gains exemption and then consider alternative planning - like for example investing in an ISA or pension.
In addition, if you have losses carried forward from previous tax years, it may be that you can realise even great gains this tax year before onward investing in tax efficient wrappers like ISAs or pensions.
Make Use Of The Inheritance Tax Exemptions
Where inheritance tax could be a potential issue in the future, doctors should consider gifting assets up to their annual exemption of £3,000 (and if not used, this exemption can be carried back to the previous year). This may not seem a significant amount but the £3,000s can build up over the years.
Also consider starting gifting out of normal expenditure - the gifts must be out of income (not capital) and must not effect your standard of living to be effective for inheritance tax planning.
Make Use Of The Pension Allowance
If you are doctor with a non-earning spouse/partner it is still possible to contribute to their pension up to a maximum of £3,600 gross in a tax year and still get £720 in tax relief even if your spouse/partner is a non-tax payer.
Remember the maximum deemed pension contribution per tax year is now £40,000 and this includes your NHS Pension contributions (3 year carry back is available for un-used pension allowances brought forward).
Make Use Of The ISA/JISA Allowance
It is now possible to shelter £15,000 in an ISA in stocks and shares or cash or any combination of the two. If the allowance is missed in the tax year - it is missed for ever. So all doctors should at least consider their ISA allowance for this tax year.
In addition, the Junior ISA and Child Trust Fund limits are £4,000 per year and give similar tax free investment opportunities.
Consider Investments That Give Tax Relief - Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs)
Investments in VCTs or EISs receive tax relief upfront of 30% subject to maximum investment amounts (currently £1m and £200,000). These investments give an income tax reduction (i.e a refund) and are highly tax efficient.
If you are a doctor in Bristol who now needs to start considering their tax-year end allowances and reliefs - then get in touch for an initial discussion over the options. Call 0117 966 5699 or email firstname.lastname@example.org