Tax Year-End Countdown - Are you prepared?

Allowances

For those who have yet to fully use their allowances this tax year, there is still time to do so, as the deadline is 5 April 2019. In addition to a pension allowance of up to £40,000, capital gains allowance of £11,700, dividend allowance of £2,000 and adult ISA allowance of £20,000; there are certain situations in which unused allowances from previous years such as pensions, can be used in the current tax year or potentially carried forward. 

Charitable donations

Donations to charities that qualify for Gift Aid can provide the donor with tax relief whilst also allowing the charity to claim a top-up from HM Revenue & Customs (HMRC). For example, if an individual in the additional rate income tax band makes a Gift Aid donation of £20,000, the charity can reclaim £5,000 from HMRC whilst the donor benefits from £6,250 in tax relief. The overall impact is that the charity receives £25,000, with a net cost to the donor of £13,750. Note that the timing of the donation is important, as it will determine the tax years in which the donor can claim relief.

Gifts

• While the gifting of UK assets is typically within the scope of UK inheritance tax, it is worth keeping in mind that certain exemptions are available:
• Annual gift allowance of £3,000 
• Parental contributions to a child’s wedding of up to £5,000 are also exempt gifts.
• Grandparents and great-grandparents can also give exempt wedding gifts of up to £2,500; whilst non-relatives can gift up to £1,000.Multiple gifts of up to £250 per recipient (subject to no other allowance being used).
• Gifts exchanged between spouses or civil partners living in the UK are potentially exempt from inheritance tax.
• Gifts to political parties or charities

Investing for children

Ordinarily, if a child’s bank account earns more than £100  interest in a tax year, the parents are responsible for paying tax on this amount. However, this provision does not apply to junior ISAs, where interest remains tax-free. Once the child becomes an adult, the junior ISA should  converted into an adult ISA, and the funds remain in a tax-free wrapper. Funds in a junior ISA can be invested into cash, into stocks and shares, or into a combination of the two, with the allowance for the current tax year set at £4,260 per child.  

How is property taxation changing for UK residents? 

Capital gains tax – reporting and payment window for UK residents

From 6 April 2020, UK residents will be required to report and pay UK capital gains tax within 30 days of disposing of their UK property rather than the current deadline of 31 January following the end of the tax year in which the disposal takes place. This acceleration of the tax payment date will immediately reduce the net sales proceeds that can be reinvested or used for other purposes.

What property tax changes will impact non-UK residents?

Commercial property held by non-UK residents

From 6 April 2019, disposals of UK commercial property by non-residents will be subject to UK tax. A rebasing of the capital gains base cost is permitted in certain circumstances, such that only gains on or after 6 April 2019 will be taxable. Affected individuals may benefit from obtaining an independent valuation in order to justify a future capital gains calculation. 

Capital gains tax – reporting and payment window for non-UK residents

From 6 April 2019, the current reporting and payment window for non-UK residents of 30 days in respect of UK capital gains tax arising on UK residential property will be extended to also include UK commercial property. This acceleration of the tax payment date will immediately reduce the net sales proceeds that can be reinvested or used for other purposes. 

Consultation of additional 1% stamp duty for non-residents

HMRC has opened a consultation seeking views on the government’s proposed 1% stamp duty land tax (SDLT) surcharge for acquisitions of residential property in England and Northern Ireland by non-UK residents. It applies to both non-resident individuals and ‘non-natural’ persons (e.g. companies, partnerships and trusts). 

If implemented, the 1% surcharge could  also apply in addition to the current 3% surcharge that applies to purchases of additional properties.  

What’s specific to non-domiciles residing in the UK? 

Cleansing of mixed funds

As part of the UK’s reform of its non-domicile regime, qualifying individuals with offshore mixed funds can segregate these into their constituent parts, allowing access to clean capital that would not otherwise be available without first remitting income and gains into the UK. 

The cleansing must be effected by way of a nominated transfer from one offshore account to another offshore account, and the deadline to claim this relief is 5 April 2019.

Disclaimer

This article is for general information purposes only and should not be used or relied upon as professional advice. It is based on UK tax law and HMRC guidance in effect at the time of publication and no liability can be accepted for any errors or omissions, nor for any loss or damage arising from reliance upon any information herein. It is advisable to contact a professional advisor if you need further advice or assistance, as tax implications can vary depending on an individual’s personal circumstances and may be subject to change in the future.