16 March 2018 | Comment | Article by Jason Lloyd

Your guide to year-end planning: tax

The time to give your finances a year-end review is fast approaching. Are you using all of your tax allowances? Are you making the most of your pension contributions? Is there any way you can boost your savings?

Our Independent Financial Advisors have put together a three part mini-series about year-end planning, to help you make any important financial changes before 5 April 2018.

The first part of our series will be discussing tax allowances.

The second part looks at how to make the most of your pension contributions and the third installment is all about savings.

Capital Gains Tax allowances

Every individual has an annual Capital Gains Tax (CGT) allowance which allows them to make gains on investments of up to £11,300 free of tax. However, any gains in excess of the allowance are charged to CGT at either 18% or 28%, depending on the individual’s other total taxable income that year.

If unused, the allowance cannot be carried forward to the next tax year. It is advisable to use this tax-free allowance each year to reduce the risk of incurring a significant CGT bill in the future. Married couples can also make use of each other’s allowances via a transfer, to maximise the tax-efficiency.

By checking your CGT exposure each year, you could reduce future liabilities. If appropriate, consider what’s known as a ‘Bed and ISA’ transaction. This is useful for investments held outside a tax-efficient ISA or pension, where there might be a CGT bill in future.

By selling some, or all of your assets this year, then immediately buying them back within an ISA, you can use this year’s CGT allowance to move your investments into a tax-efficient environment.

It’s important not to realise a profit above the CGT allowance, or to sell more of the investment than you can buy back within your ISA allowance (£20,000 in 2017/18), assuming you haven’t used any of it for other purposes.

New rules on Inheritance Tax (IHT)

The new ‘residence nil-rate band’ (RNRB) now enables a ‘family home’ to the passed wholly or partially tax-free on death to direct descendants. The amount of relief will be phased in over four years as follows, and increasing thereafter with inflation:

  • Year one (2017/18) - £100,000
  • Year two (2018/19) - £125,000
  • Year three (2019/20) - £150,000
  • Year four (2020/21) - £175,000

The RNRB is in addition to an individual’s own nil-rate band, and any unused nil-rate band may be transferred to a surviving spouse or registered civil partner.

In order to qualify, you must own a property or share in a property, which you have lived in at some stage and which you leave to your direct descendants (including children, grandchildren or step-children).

For estates over £2 million, the RNRB is reduced at the rate of £1 for every £2 over £2 million. In addition, it only applies on death and not on gifts or any other lifetime transfers.

Small gifts are exempt from Inheritance Tax

Take advantage of exemptions. You can give away up to £3,000 a year, known as your ‘annual allowance and is immediately exempt from Inheritance Tax (IHT). This exemption can be carried forward for one tax year if unused.

Therefore, it is possible for a married couple to gift away as much as £12,000 using the annual exemption; on the basis neither of them has used the exemption already in the current or previous tax year.

In addition, lifetime gifts to any person that does not exceed £250 in a tax year are exempt. Furthermore, lifetime gifts in consideration of marriage are also exempt, for example, parents can gift £5,000, grandparents can gift £2,500 and gifts of up to £1,000 can be paid from others.

By giving your financial situation some attention before 5 April 2018 it will ensure you have the flexibility to manage your financial affairs effectively. To find out more or to discuss your situation, please get in touch with our Independent Financial Advisors on 029 2066 0565 or email ifa@hughjames.com. We look forward to hearing from you.


Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxations are subject to change.

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