Tax Intelligence

An individual can generate taxable income this tax year of up to £22,000 and pay no income tax

A ‘One Nation’ Tory party to tackle the Brexit negotiations – what is this likely to mean to you? Probably higher inflation due to depreciation in sterling, and increased taxation to tackle the deficit.

It is therefore critical you make your money work as hard as possible, and legitimately reducing the amount of tax you pay has always been high on our planning agenda. This article is a reminder of the income tax allowances and exemptions which are currently available.

  • Personal Allowance

This tax year is £11,000 (except for individuals with income over £100,000); by minimising your earned/pension income to no more than £11,000 will ensure that you have the prospect of receiving a full £5,000 personal savings rate band taxed at 0%.

In addition as individuals you would also be entitled to a Personal Savings Allowance of £1,000 which is free of tax.

By spreading cash deposits across 2 individuals with, say, interest at 1% per annum then holding up to £1.2 million jointly by a couple will generate taxable interest of £6,000 per annum each.

With careful planning the above generates £34,000 of taxable income that suffers no tax!

  • Dividend Allowance

Changes in dividend taxation mean that all investors are entitled to £5,000 per annum of dividends taxed at 0%. If we assume dividend income at 2.5% per annum by investing say £400,000 jointly a further £10,000 of taxable income is generated taxed at 0%

An individual can therefore generate taxable income this tax year of up to £22,000 and pay no income tax (£44,000 per couple). A salaried employee would need to earn £27,695 to receive a net of tax (and National Insurance) income of £22,000.

To add to this there is the possibility of non-taxable income from Individual Savings Accounts (ISA).

There are other allowances and exemptions for capital gains tax and inheritance tax that are available. As part of our maintenance remit we review your financial circumstances and objectives to ensure that tax is minimised, maximising the returns for you and your family.

The information provided in this article is for information only and does not constitute personalised advice.