March - the month of tax saving tips!

March 5, 2018 by Melinda at Giles Wilson Solicitors

March is always a significant month in the family calendar as we cover Mother’s Day and Easter, it is the beginning of Spring, the clocks go back and we celebrate St David’s Day and St Patrick’s Day.  There is plenty to keep us busy, but this March, by the time we return from the Easter bank holiday we are already into April and almost at the end of the financial year.

Therefore, March is the time to consider checking whether you are using up all your capital tax allowances.  Inheritance tax and capital gains tax planning is something that affects more of us than it did do, but there are also some myths about that I hope to dispel.

Just last week a client proudly told me that she had given £6000 away to each of her two grandsons “because I know that is what I’m allowed to do”.  Luckily for her two grateful grandsons, her gifts to them had been based on a misunderstanding because actually their grandmother’s probate estate will be under the nil rate band at which inheritance tax is payable.  This means that the tax man has no interest in how much she gives away, but likewise she can die with all her estate intact, and there will be no tax payable.

The myth of the £6,000 gift came from the rule that if you die leaving an estate that is subject to inheritance tax, then HMRC are usually obliged to ignore £3,000 per financial year that you may have given in gifts.  You can often back date this amount by one year, so, for example, this March you may be able to make one gift of £6,000 and it will not count within your 7 year rule if you die. However, as with every “tax rule”, this will always depend upon your personal circumstances.  In addition to the general tax free rule of being able to give away £3,000 you can also gift specifically approved sums on marriages and birthdays. But the over-riding principle is that it is only saving tax if there would be tax to pay in the first place and the tax that we are referring to is Inheritance Tax.  You do not save income tax by gifting money to family.

Inheritance Tax planning has become more complex in the last couple of years as the regime itself is so much more complicated with residential nil-rate bands coming into effect, and the succession line being specified. It is now important to retain records if selling a valuable family home to down-size as this could impact on a claim for tax relief in the future – this should be coupled with reviewing your will.

Capital Gains tax is payable on the transfer or sale of properties that do not benefit from the Owner Occupier exemption.  So second homes, or properties inherited (even during the probate process). The cut off time for each capital gain is 5 April to benefit from the personal allowance so again, if you are thinking of this type of transaction, March is your month! Always take advice however on your own particular circumstances!

And finally any investment in an ISA needs to be completed by 5 April – the ISA Right to Buy Scheme is a scheme for first time buyers that literally gives a cash bonus if you save towards your first property purchase.

So when popping along the Broadway for your Mother’s Day cards or Easter Eggs, pop into one of the banks along there too, or contact one of the solicitors in my office at 54 Broadway if you require advice on any of the matters referred to.

This article is by Melinda Giles at Giles Wilson Solicitors.  
For legal advice please call 01702 477 106 or visit one of Giles Wilson's offices: 1711 London Road Leigh, 54 Leigh Broadway, 5 Roche Close Rochford  
Website: www.gileswilson.co.uk

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If you would like to put forward a question to Melinda, please comment below or email joanna@leigh-on-sea.com