Plan to minimise tax

With the tax year end of 5 April fast approaching, Ian Tongue says it is a good time to take stock of where you are up to and consider any action points before this date

blank calendarThere are many allowances available each tax year and per taxpayer, so it is certainly worth considering your options.

This article looks at a number of key areas and is not a complete list nor does it constitute investment advice. As always, your individual circumstances should be discussed with your accountant or independent financial adviser.


With the current unprecedented low rate of interest and no signs of rises despite monthly rumblings, savings rates are generally low.

Coupled with interest being a taxable income, it makes sense to consider a tax-efficient place to put your savings. For many years, the Individual Savings Account (ISA) has been a popular choice, as the income generated is free of income tax and capital growth is free of capital gains tax.

Changes to ISAs early in 2014 now refer to them as a New ISAs or NISAs. There are differences bet­ween the old ISA and NISA, primarily around flexibility.

Previously, you could only invest half of your annual allowance in cash, but now you can decide how much is in cash and how much is invested in stocks and shares. It can be any combination.

The amount that can be invested has increased to £15,000 a year (2014-15) and, importantly, this is per person, so your spouse’s allowance will double it up to £30,000 as a couple. But remember, any unused allowance does not roll over to the next period.

Your decision whether to invest in cash or shares should be made following advice tailored to your circumstances. Banks and advisers can provide a NISA, so shop around.

Another avenue you could consider is your current account. Historically, very low rates of interest are applied to current accounts. But the high street banks are battling for your custom and many offer headline-grabbing rates of interest on your current account.

Each one has a cap on how much you can have in your current account attracting the higher rate, for obvious reasons. The interest applied to accounts such as these is taxable and it is important that you declare this to your accountant each year to include on your tax return.


There are a number of tax-efficient vehicles to invest in out there, with the most common ones being Venture Capital Trusts (VCTs), Enterprise Investment Scheme (EISs) and a newer Seed Enterprise Investment Scheme (SEISs).

These types of investment allow an income tax deduction based on the amount invested. There are limits to how much can be invested and the tax relief ranges from 30% for VCTs and EISs to 50% on SEISs.

These types of investments are generally riskier than others and the schemes were introduced to encourage investing in businesses in the start-up and growth stages of their life. It is important that the risks are explained fully.

There are others types of investments and schemes available, and many of them can carry significant risk for the potential benefit of significant tax relief.

HM Revenue and Customs has well publicised new measures to tackle tax avoidance and many aggressive tax avoidance schemes have been shut down. This is a specialist area and a full consideration of the risks is essential.

As always, it is vital that any investing activities are discussed with an appropriately qualified professional adviser who is authorised to provide such advice.


Pensions for doctors has been a particular hot potato for the last few years with soaring contribution rates, proposals to make members work longer and potential watering down of the benefits.

Coupled with the above scheme changes, there have been important changes to the tax relief offered on annual pension contributions and the overall amount that a pension pot(s) can reach before a tax charge arises.

The rules are complex, but, at present, you can pay £40,000 a year into a pension scheme and obtain tax relief.

For most workers who are not employed by the NHS or other public sector body, this would be straightforward, as most will be in ‘money purchase’ pension schemes where you are effectively buying an investment that may go up or down.

For those consultants in the NHS Scheme, the pension is not worked out based on what you have put in, but by reference to earnings level and length of service.

A significant pay rise from an increment point or clinical excellence award could result in a substantial ‘notional’ contribution being calculated. Thankfully, where you have exceeded the limit, you can look back three years and any unused relief can come to your aid to hopefully extinguish any tax charge.

Due to the complexity of the above, the ability to pay further amounts into a personal pension scheme may be limited.

Additionally, paying into personal pension schemes may breach any pension protection that you may have in place. It is important that you consult your IFA before making any additional pension contributions.

There have, however, been significant reforms to personal pensions recently, allowing far greater flexibility on what can be done with the funds on retirement.

Previously, the most common position was that an annuity (annual income) was purchased with the funds, but now you can draw down on the fund, subject to certain criteria.

For a spouse who may not have as good a pension in place for their retirement, this may be an option to consider. An adviser can discuss the changes and your own circumstances in more detail.

Gifts and Gift Aid

Inheritance tax rules allow you to give away £3,000 of your estate each year (not from income). If you have not used the prior year allowance, this can be doubled up to £6,000. There are certain other special occasions, such as marriage, and the figures are per donor not receiver.

Gift Aid is the Government scheme where tax relief is available for both the donor – assuming they are a higher-rate taxpayer – and receiver.

Making a gift before the 5 April 2015 will ensure that you receive the tax relief at the earliest opportunity. For a claim under the scheme to be valid, the recipient must be a UK registered charity.

Asset disposals

Each year you are allowed to make gains on the disposal of an asset(s) and not pay capital gains tax, up to an annual limit. For 2014-15, this is £11,000 per taxpayer.

As a result, you should consider the timing of disposals to either maximise the relief or defer disposals, where possible, to use the following year’s relief.

There are usually other considerations with capital disposals and if you are considering any, it is advisable to discuss matters well in advance with your accountant.


Ian TongueFor those trading as a limited company, it is worth considering the timing of dividend payments. It may be beneficial to pay dividends before 5 April 2015 or indeed delay payment, depending on your circumstances. Discuss matters with your accountant well in advance of the tax year-end.

The above covers some of the areas that should be considered in advance of the tax year end of 5 April 2015. As always, taking advice tailored to your individual circumstances is essential.

Ian Tongue (right) is a partner with Sandison Easson & Co chartered accountants