Year End – Time to Spring Clean Your Finances

Published on: 20 Feb, 2013
Updated on: 20 Feb, 2013

Jon Hills, a tax partner at the Guildford office of PKF Accountants & business advisers, offers some financial advice to Surrey individuals ahead of the end of the 2012/13 tax year on 5 April: “With less than two months to go before the end of the tax year, now is the time to use up any remaining allowances and start preparing for some of the changes that will come into effect on 6 April.”

Here are some things you can check:

Pensions

The tax system incentivises the self-employed and employees to maximise their personal contributions to personal pension plans. The annual contribution limit for an individual (the total of personal contributions and those made by an employer) is the lower of 100% of net relevant earnings and £50,000. For personal contributions below this threshold, tax relief is available at the individual’s marginal rate of tax. With this in mind, the forthcoming reduction in the top rate of income tax to 45% may provide a reason for some individuals to bring forward their pension contributions to before 6 April.

ISAS and Junior ISAS

Now is also the time to use up any remaining ISA allowances to which you and your family are entitled. UK residents aged 18 or over can invest in one stocks and shares ISA and one cash ISA each year subject to the overall £11,280 limit for 2012/13. And parents who have used their own ISA limits can invest for a further £3,600 for children under the age of 18 through a junior ISA. Junior ISAs operate in a similar way as adult ISAs – income and capital gains generated will be tax-free.

…less than two months to go before the end of the tax year… Jon Hills, a tax partner at PKF

Capital Gains

Capital gains up to the £10,600 annual exemption can be realised tax free in the 2012/13 tax year, and any gains above this threshold are then taxed at either 18% or 28%, depending on the individual’s marginal rate of income tax. Unused exemptions cannot be carried forward into future tax years and are therefore effectively lost.

Tax Codes

HM Revenue & Customs (HMRC) has already started issuing tax coding notices for 2013/14 to employed individuals and those receiving occupational or personal pensions. It is important that these are checked carefully to ensure that the best possible estimate of the amount of tax due is deducted from your monthly income for 2013/14.