South: Review tax reliefs, entrepreneurs warned

As the end of another tax year approaches, cashflow, business profitability and even just surviving until the next payday are hot topics. The tax year end on 5 April 2009 is a good time to consider your financial position and check whether you have taken full advantage of the tax reliefs and exemptions that are available.

Tenon, the adviser to entrepreneurs, says that there is no time like the present to review your personal and business finances – to make sure they are on track to meet your financial goals while reducing your tax obligations as much as possible.

Peter O’Sullivan, national head of Financial Services, says there are a number of planning opportunities people can consider, depending on their circumstances. “Effective financial planning includes taking advantage of available allowances and exemptions such as deductions for pension contributions, ISA allowances and inheritance tax exemptions.”

“The message is act now to save money by making the most of the tax relief available, saving through tax efficient instruments and reducing the inheritance tax on your estate.” O’Sullivan adds.

Andrew Jupp, national head of Tax, commented: “If you’re a business owner, consider the tax efficiency of your remuneration packages, minimise tax on the sale of your business and have a plan in place to extract profit tax efficiently from your company. Individuals and business owners are feeling the effects of the credit crunch so it’s important to look at all the avenues open to you.”

Here’s a summary of some of the areas which offer tax relief:

Individual Savings Accounts (ISAs)

• Annual allowance of £7,200.

• Limit for a Cash ISA is £3,600.

• All gains currently free from capital Gains Tax

• No liability to income tax.

Pensions

• Lifetime allowance of £1.65m and annual allowance of £235,000. Both limits will increase annually.

• Any pension payment made by 5 April up to £3,600 is allowed and 20% basic rate tax is deducted at source. This reduces the actual cost to only £2,880 for basic rate and non-taxpayers and £2,160 for higher rate taxpayers.

Inheritance tax (IHT) planning

• Each individual can make IHT exempt gifts of up to £3,000 in a tax year. If the exemption was not used last year, it can be carried forward for one year only, so gifts of £6,000 could be made in 2008/09 tax year.

High risk investments

• Investments such as Venture Capital Trusts and Enterprise Investment Schemes offer attractive tax relief (30% of the amount subscribed for VCTs and 20% for EISs). They are high risk investments as they invest primarily in start-up companies and will therefore only be suitable for certain types of investor.