The Summer is over, we are now entering Q4 and for many the tax season is once again upon us.

It’s always a busy time in September and October, trying to pick up the activities that were left hanging from the holiday season, striving to bring in sales and planning for next year’s growth. Irrespective of the hectic diary and task list, it is important to realise that at this point in the year communication with your accountant will be one of the most vital activities on your list.

There have been some significant tax changes in the last year that affect individuals and business owners alike and which therefore affect the amount of tax that may be due at the end of the year.

For example:

New Dividend Tax Allowance and Rates – From 6th April 2016, the first £5,000 of dividend income has been tax free and new tax rates apply for annual dividend income in excess of this amount. It’s worth talking to your accountant to get an estimate of the impact of this on your annual tax payments. If you are married do let your accountant know as if you or your spouse has divided income above £5,000 and the other does not, there may be scope to transfer some investments without incurring a tax charge.

Personal Savings Allowance and Tax Rates on Savings Income – Since 6 April 2016 banks and other institutions have stopped deducting tax of 20% from interest they pay to you. However this doesn’t necessarily mean that you don’t need to pay tax on interest and other savings income. There is a £1,000 allowance for basic rate taxpayers in respect savings interest and higher rate taxpayers can receive up to £500 of interest tax free, however, additional rate tax payers are fully taxable on all of their savings interest. For basic and higher rate taxpayers any excess over the allowance is taxable via your self – assessment tax return at 20% or 40%.

In addition to the above, for savers with relatively low employment and / or pension income, there is a 0% starting income tax rate which can mean that in certain circumstances up to £5,000 of interest income can be effectively tax free.

It’s worth talking to your accountant to confirm you are benefiting from as these allowances.

Marriage Allowance – On 6th April 2016 the allowance that was initially introduced in 2015 was raised from £1,050 to £1,100. This allows you to transfer this amount of unused annual tax-free personal allowance from a non-taxpayer to their spouse who is a basic rate taxpayer. If you are married it’s worth discussing your circumstances with your accountant as you may able to benefit from this allowance.

The implications of ticking the Gift Aid Box on Charitable Donations – The point of this box is to identify you as a UK tax payer and your chosen charities can then claim extra income from the government. Be aware that this extra amount that the charities can claim must be covered by the amount of tax you paid in the year of your donation. Any difference or shortfall between your annual tax liability and the amount claimed by the charities is required to be met by you personally. However if you are a higher rate tax payer, your gift aid donation can reduce your overall tax liability.

It’s worth letting your accountant know if you have made or are planning to make charitable donations and find out if the rules have affected your tax liability.

Here at Keen Dicey Grover we have over 40 years of experience in understanding and analysing tax. We work hard to save our clients the headache and the time of dealing with their own tax affairs because we know it’s our job to do the number crunching, to resolve the complexity and to provide our clients with the confidence and comfort of knowing that their finances and tax liabilities are efficient and in order.

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