Prepare for the end of the tax year and save money

The end of the tax year is getting close so now is the time to start planning ways to keep your money from the taxman. Save your money with ISA allowances and pension contributions
It might not feel it but spring is coming and with it, the end of the tax year. London’s buses are full of adverts about using up ISA allowances, but there’s plenty of other planning to do now to keep your cash from the taxman.

In fact, “this year’s tax deadline brings some of the most significant changes for tax payers in recent years,” warns David Truman, partner at accountancy firm Menzies. “It is an excellent time to review tax arrangements to ensure you are not missing out on the reliefs available.”

The first tip is to examine your pension contributions. If you can afford to do so, now is the time to maximise your full annual pension allowance. It stands at £50,000 for 2012–13 and 2013–14, but will drop to £40,000 after that.

“You can carry forward unused allowances from earlier tax years too,” Truman adds. “Individuals may be able to carry unused allowances from the previous three tax years forward, which could allow a one-off contribution of up to £200,000.”

Some people who have a SIPPs (Self-Invested Personal Pension) can also make a one-off change to their pension ‘input period’ to enable a further £50,000 contribution at the higher allowance - ask an accountant if you think you could benefit.

“If you are an additional rate taxpayer, you can still benefit from up to 50 per cent income tax relief on personal contributions to pensions for the remainder of 2012–13,” Mr Truman points out. “So it is worth locking in this rate now.”

Other ways to save you splashing out on extra tax is to make the most of the falling top rate of income tax. From April 6 2013, it drops from 50 per cent to 45 per cent, so if higher-earners can, “deferring income from the current tax year to the next, and bringing forward expenditure or deductions into the current tax year can substantially improve your tax position.”

Depending on the terms of your contact, bonuses or dividends can be also deferred into the next tax year while pension contributions may be bought forward to before 5 April.

Married couples: working together could help you make more savings. “The personal allowance cannot be transferred between spouses, but you can consider giving a gift of assets to distribute income more evenly,” Mr Truman points out. “For example, you can save up to £400 a year by transferring just £1,000 of savings income from a higher rate (40 per cent) taxpaying spouse to one with income below the personal allowance (£8,105). If you are paying the additional rate of tax (50 per cent), which applies to those with taxable income above £150,000, your saving could be £500 a year,” says Truman.

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