Solicitors year end tax planning – part 2
Monday, 25 March 2019
In part 1 of the blog, we examined three ways a solicitors firm can plan to reduce its tax liability. In this blog, and with the tax year end looming, we examine three tax-mitigating opportunities available for individual solicitors.
- Pension contributions
This is the final year in which you can make pension contributions that are not subject to tapering restrictions, if you had a pension scheme in 2015/16 and did not use your full allowance of £40,000 in that year. The provisions allow an individual to carry forward any unused pension contribution allowance for a maximum of three years. The allowance has been £40,000 in each subsequent tax year, however, the allowances in these later years have been subject to tapering restrictions for individuals earning between £150,000 and £210,000, meaning that the highest earners are only entitled to an allowance of £10,000 per year after 2015/16. If you fall into this bracket and have unused allowances from previous years, it’s worth considering making contributions before 5 April 2019.
- Individual Savings Account allowance
Individual Savings Accounts (ISAs) allow individuals to save and earn interest tax-free. The current allowance is £20,000, and this allowance will expire with the end of the tax year. There are four different types of ISA and an individual is able to put money into each kind in each tax year, but to a maximum of £20,000 in total. Individuals looking to save money in a tax-advantageous manner should consider making contributions into an ISA before this year’s allowance expires on 5 April.
- Enterprise Investment Scheme and Seed Enterprise Investment Scheme
Venture capital schemes offer generous income and capital tax reliefs for investors. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide investors with income tax relief at 30% of the investment for EIS (on a maximum investment of £1 million) and 50% of the investment for SEIS (on a maximum investment of £100,000). Additionally, when the investments are sold, both schemes offer capital gains tax reliefs. A solicitor looking to make tax-advantageous investments should consider venture capital schemes such as EIS or SEIS given the potentially large tax savings available.
With all of the above, we would advise individuals to talk with us and their financial advisors. We would be happy discuss tax-advantageous opportunities with you, with a view to helping you to reduce your tax liabilities wherever possible.
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