Planning to get done before the end of the tax year
10 March 2019
Start to look at what’s next before you finish what’s now, suggests the Prudential technical team
We’re into tax year end and many people are busy getting all those things done as 5 April looms, whether that be finalising pension contributions, using up allowances or bed and breakfasting those capital gains. But should we be lifting our noses from the grindstone to take a look into 2019 and beyond?
With a clear view of next tax year there are things we might want to do or refrain from doing, prior to tax year end, with next year in mind.
Which clients are retiring in 2019?
Those retiring, especially early in the tax year, will likely see their ability to pay into a pension seriously curtailed with a maximum contribution of £3,600 gross. It might be an idea to use any spare capital to maximise pension contributions by 5thApril.
Bob is a higher rate tax payer on £66,350, he will be a basic rate tax payer in retirement. If he pays £20,000 gross into his pension this will cost him £12,000 after tax relief. £1,000 a year from your £12,000 capital lasts 12 years. £1,176 (£1,000) net out your £20,000 pension lasts 17!
Wouldn’t it be nice to be a basic rate taxpayer in your final year of work, especially when it makes your non work years wealthier? Or how about being a non-taxpayer in your final year of work by paying 100% of your relevant earnings? Pensions usually last longer than capital: tax relief and tax free cash see to that.
For more on individual tax relief
Who’ll be unhappy with the £50,000 higher rate threshold?
The budget confirmed the higher rate threshold was being accelerated to £50,000 next year. Those with salaries between this amount and £46,350, the current threshold, may not get higher rate tax relief on next year’s contributions. Should we bring some of next year’s contributions into this tax year?
On the flip side with a larger than expected basic rate band next year, should some investment disposals, especially bond gains be delayed? After all, where more of a “slice” is in basic rate tax the greater the top slicing relief that will be given.
For more on
Who’s getting promoted?
Anyone at the higher end of the wealth spectrum could be looking into a 2019 where they may get their annual allowance tapered. Especially those getting promoted in DB schemes as a seemingly reasonable pay rise can see a spike in annual allowance and hence adjusted income levels. The annual allowance is tapered to £10,000 where both adjusted income and threshold income are over £150,000 and £110,000 respectively. Reconsider whether additional pension funding is wise this year as you might need the carry forward next year.
For more on tapered annual allowance
Is investment income a good idea next year?