Welcome to the February 2019 newsletter from Chamberlains


Well, we got through January without too many problems, and now we’re looking towards the tax year end – we (and perhaps you) ought to think a bit about tax planning.


Before I get into some details, Chris and I would like to congratulate Keith for passing the chartered tax exams – so he can call himself a Chartered Tax Advisor, and we can call upon him for more technical queries.  And upon Vikki too – she’s part-way there, taking a slightly more leisurely route.  I suppose we ought to get some updated business cards…  (In case you’ve forgotten, Keith and Vikki are our long-serving managers.  We also have Nikki as another newer manager, and Shelene, the office manager who tries to help us all in order.)


Anyway – Tax-planning.  There are a number of things where timing is important.  Some you can’t do anything about; others you can.  The main things to think about for individuals are:


Pensions (groan! – not again, you say)

Capital Gains Tax

IHT-free annual gifts


Charitable donations

Income from a business




No apology for mentioning these yet again.  Payments into a personal pension mean that more of your income is taxed at 20% rather than 40% if you’re a higher rate taxpayer.  However, for this to apply to the tax in the year ended 5 April 2019, the payment must be made before then.  Maybe you’re worried about what investments are going to be doing over the next few months while our politicians sort themselves out.  A fair point – but you don’t need to invest the funds.  They can just sit as cash in your pension fund until you decide what to do with them.


There are limits as to how much you can pay in each year.  It’s normally £40,000 (unless you earn over £150,000) but you may be able to use spare £40,000s from previous years if you can afford it and if your earnings allow.


I’ve talked a lot about pensions in previous months, so I’ll say no more now – but please contact me if you’d like any more help.




This is another “use it or lose it” opportunity.  We’re all allowed to make capital gains of £11,700 this year without paying any tax.  If you have investments that have increased in value – whether shares or property – you’ll probably have to pay some CGT when you sell them.  However, if you can spread the sale over more than one tax year (sell part this year and part next year), you can have more than one tax-free £11,700.  And if you can give some part of the investment to your spouse, they can also benefit from the tax-free amount.


The key date is the exchange of contracts, not receipt of money; it needs to be pre 5 April to fall into this tax year.  And note: transfer between spouses (or civil partners) works well – all such transfers are tax-free.  However, if you give it to your children or anyone else, it’s treated as a “deemed disposal”.  In other words, the taxman treats it as if you’d sold it at market value, even if you received nothing for it, and you’re taxed on any capital gain.


Thinking a bit more about transfers between spouses: sometimes it happens that one has a potential capital gain whereas the other has a potential capital loss.  In other words they (or their advisor) can see that this is what would happen if both sold their respective investments.  A good planning idea here is for one to transfer their investments to the other to sell, so that the loss can be offset against the gain.  For this to work, the loss needs to be made in the same or earlier tax year as the gain – you can carry forward losses to offset against future gains, but not the other way round.




Inheritance Tax (IHT) is payable at 40% on a person’s assets when they die (let’s call her Catriona), before her heirs receive their perhaps long-awaited wealth.  The first £325,000 (the “nil rate band”) is ignored, and if a spouse died previously, there may be a second £325,000 available.  There’s also an additional amount of £125,000 where the family home is left to direct descendants.


However, if Catriona had given gifts to anyone in the previous seven years, these are added back into the estate, so there may be further IHT to pay.  Fortunately, there’s an annual amount of £3,000 that can be given without being included in the tally.  This is an annual amount for each donor (not for each recipient!) but if you didn’t use last year’s amount you can give up to £6,000.




If you have spare funds but don’t want to tie them up into a pension, you could consider putting them into an ISA – whether in the form of cash or other investments.  The advantage of these is that any income and capital gains from them is tax free and doesn’t even need to be included on your tax return.  The annual amount is currently £20,000, more than enough for most people.


There are two other sorts, at lower levels.  The first is a Junior ISA.  Parents or other relatives can put in up to £4,260 this year for children up to 18 who don’t have a child trust fund.  No-one can then touch this money until the child is 18.


The second is a Lifetime ISA.  This is a little bit like a pension, in that the government add 25% to investments up to £4,000 each year.  This £4,000 counts as part of the overall £20,000 ISA limit.  It’s only for people over 18 but under 40.  The funds can be used to put towards a first home, or they can be kept until retirement.  Unless, heaven forbid, you’re terminally ill, you can’t withdraw funds except for a first home until you’re 60.  If you do, there’s a 25% charge by the government.




You may like to give money (or investments) to your favourite good cause.  Provided it’s done under Gift Aid, this is rather like a pension payment – you pay more tax at 20% rather than 40%.  If you pay £800 to the charity, they can reclaim another £200 from HMRC.  And then on your tax return, the basic rate band (the income on which you pay tax at 20%) is extended from £34,500 to £35,500.  Assuming your taxable income is more than this, this means that you pay tax at 20% on the extra £1,000, rather than at 40%, so you’ve saved tax of £200.


In other words, the charity has had a donation of £1,000 that has cost you just £600.  The donation needs to be made by 5 April but, unlike pensions, it can be carried back to the previous tax year.




If you run your own business, you have more flexibility than if you’re an employee or pensioner.  What you can do depends on whether you’re running it through a company.  However, you are likely to have some choice as to how much income to take from the business in a particular tax year, and there may be the opportunity to share some of the income with other family members.


This is more complicated than the other points mentioned above – you should liaise with your accountant to think about what can be done.


That’s probably enough to think about for the moment.  If any of these points seems particularly relevant and you’d like to think about them more with our help, please let me know.