Article provided by Guy Sterling, Partner at Moore Kingston Smith, for Beacon Gainer private wealth advisory services group. First published in New Model Adviser January 2020, reproduced here by kind permission from New Model Adviser.

A new year represents an ideal opportunity to take stock of available tax allowances which have not yet been fully used.

Everyone should have a capital gains tax allowance of £12,000 in the current tax year which ends on 5 April 2019. This allowance cannot be carried forward and if gains are not realised in the tax year it will be wasted.

Tip: Review the capital gains and losses that have been made so far this tax year to identify if the allowance has been fully utilised.

Tax efficient investing in ISAs is another allowance that is lost if not fully used during the tax year. The maximum contribution in the current tax year is £20,000. Up to £4,000 of this limit can be paid into a Lifetime ISA, which is intended to be used for the purchase of a first home and can only be started between the ages of 18 and 40.  There is the Junior ISA for children under the age of 18, the maximum contribution in the current tax year is £4,368.

Tip: Review savings in ISA and ensure maximum contribution is used.

Saving for retirement is important for everyone. The annual pension contribution limit is currently £40,000 but this is tapered for those earning over £150,000 per year.  There are additional tax charges if the annual contribution limit is exceeded. The annual contribution limit is tapered down to £10,000 once annual income exceeds £210,000. Unused relief from the previous three tax years can be utilised in the current tax year.

Tip: Review historical income and pension contributions to use up the relief from prior years.

Landlords renting out residential property have restrictions to the tax relief on their finance costs. In the current tax year only 25% of these costs benefit from tax relief in full, with the remaining 75% benefitting from tax relief at 20%.  From 6 April 2020 tax relief will be restricted to 20% on all finance costs. The tax treatment of disposals of residential property will change significantly for sales after 5 April 2020. Any capital gains tax will be payable within 30 days of sale – this compares with a payment date of 31 January 2021 for sales that exchange unconditionally before 6 April 2020.  Properties that have previously been occupied as a main residence currently enjoy capital gains tax relief for the last 18 months of ownership, this relief will reduce to 9 months for sales from 6 April 2020.  Lettings relief can exempt up to £40,000 of gain where a let property has at some point been occupied as a main residence. This relief will be restricted to situations where the owner has occupied the property at the same time as the tenant for sales from 6 April 2020.

Tip: It can take time to find a buyer and complete a property sale. Act now if a property sale is being planned.

Lifetime cash gifts to family members are potentially exempt transfers for inheritance tax purposes.  But these can create an inheritance tax charge if the donor passes away within 7- years of the date of the gift. Individuals have an annual gift allowance of £3,000, and any unused allowance from the previous tax year is also exempt.  Gifts of up to £250 made to an individual are exempt per tax year. Regular gifts out of surplus income are exempt, provided the donor’s lifestyle is not affected.

Tip: Review gifts since 6 April 2018 and compare your net income to your expenditure for the current tax year to maximise the gifts that qualify for inheritance tax exemptions.