By Louise Misiewicz
How can you reduce your tax liability in 2017?
My team of accountants and property experts were discussing the impact of legislation on property investors – and the effect this might have on the tax liabilities of our property investment clients in 2017.
Tax reduction strategies are a hot topic for any property investor, and my team are constantly being asked for help and advice on minimising tax liabilities – this can be through reducing CGT paid, lowering tax paid on HMOs, minimising IHT payments, and a number of other legal tax reduction strategies we implement.
How can property investors lower their tax bill in 2017?
We wrote a detailed article here at the end of last year discussing how our investment clients could benefit from a more in-depth understanding of the new tax brackets being introduced in April of this year. It’s well worth a closer look, as the tax changes in 2017 rapidly approach.
Some of the simplest legal ways to reduce your tax bill in 2017 could include:
- Transfer your buy to let properties to a) your spouse b) your children free from CGT
- Using a partner’s income tax allowance – the personal allowance will rise to £11,500 in April 2017, so couples should make the most of this.
- Making the most of saving allowances – the first £1,000 of savings income is tax-free for basic rate taxpayers, or £500 for higher rate taxpayers, under the personal savings allowance.
- Utilise your pension scheme allowance – the first £5,000 of dividends from select stocks and shares are now tax-free, meaning a couple could receive £10,000 from these investment payouts without paying tax.
- Set up a pension scheme for your spouse – if you’re a high-rate taxpayer, for every 60p you saved, another 40p is added by the government, making it a tax-efficient way to save money.
- Use your CGT allowance within an ISA – one way to make the most of the tax breaks available here is to sell shares or funds, and immediately buy them back inside the year’s ISA.
- Go for Capital Gains Tax over income tax – after making the most of the new £5,000 a year dividend allowance, it makes sense to arrange investments so income-producing assets are held in an ISA.
- Register investment losses during the year – losses from assets can be offset to increase the CGT allowance, but they must also be registered with HMRC.
- Save money on IHT planning and gifting – under current rules, up to £325,000 of inheritance can be passed on without being taxed. In April, an additional £100,000 inheritance of tax allowance will be available to reduce the tax paid. In addition, there is a tax-free annual allowance of up to £3,000 to gift cash or assets to anyone of your choice, to help bring down the value of an estate in later years, whilst unused allowances from the previous tax year can be carried forward to the current tax year.
- Utilise Venture Capital Trusts for 30% tax relief – for those who pay sufficient tax, a £10,000 investment in VCT could cost as little as £7,000 after tax relief, and generate tax-free dividend income over time.
These are a series of initial potential solutions to the issue of tax reduction strategies, and I recommend that each investment client discusses their specific financial situation with our tax accountancy experts.
How are you handling your tax affairs in 2017?
Our extensive and detailed FAQ section covers numerous related tax liability areas, including income tax, allowable costs, CGT, IHT, tax relief, and property strategies for high-rate tax payers – find out more here.
If you’re unsure how to reduce your tax liability in 2017, please get in touch with me and my team here.
How to engage with us
If you want to discuss finance or property tax questions, then please book some time with me and my team using the below calendar. We can help you to understand how to navigate the legislation set to impact tax liability in 2017.
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