The final topic in our Question Time series explores personal taxes and how to make sure you can get the most from your salary and personal tax allowance. There is still chance to read the earlier blogs in this series which covered topics including MTD, cloud accounting and payroll.
The standard basic personal allowance for the 2019/20 tax year is £12,500. The Personal Savings Allowance also allows a basic rate taxpayer to receive up £1,000 in bank and building society interest tax free. This is reduced to £500 for higher rate taxpayers and £0 for additional rate taxpayers. You will pay tax on any interest over your allowance at your usual rate of Income Tax.
Don’t forget that spouses and civil partners can gift assets between each other without tax consequences. You may be able to transfer shares, money or other assets which enables both partners to make use of their allowances and may be a useful personal tax planning idea.
If your level of taxable other income is no more than £16,850 you may also be able to receive up to £5,000 of interest tax free. This is known as the starting rate for savings, the more you earn from other income (e.g. wages or pension) the less your starting rate for savings will be.
There are a range of ISAs available including cash ISAs, stocks and shares ISAs and innovative Finance ISAs. For the tax year ending 5 April 2020 you can save a total of £20,000 into ISAs, either all in to one kind (e.g. cash), or spread across the three types. ISAs offer tax free interest or income and tax free capital gains.
You can also plan for your children’s future with a Junior ISA for children under 18. These are long term tax free savings accounts for children. Cash and stocks and shares ISAs are available and the annual limit for the 2019/20 tax year is £4,368.
Private pension contributions are a tax-efficient method of building up funds for your retirement. Personal contributions cannot exceed 100% of your earnings and generally cannot exceed £40,000 per year, although additional contributions can be made in certain circumstances. If your pension pot exceeds £1.03m at the point of retirement then an additional tax charge can be incurred. The benefit of making private pension contributions is that they increase the amount of your income that is tax free. In addition higher rate tax payers may be able to claim an additional 20% tax relief. Furthermore, if you have your own company then company contributions can be made which provides tax relief for the company.
We always recommend that you think about seeking professional advice if you are considering tax planning ideas. Whilst the suggestions above may be fairly straightforward you should also consider other factors such as the level of net income you need, the reason you are saving and retirement planning generally as these may impact on your decision. We would be pleased to discuss any of the above ideas with you, please contact us.
Our next blog will round up some of the key points we have covered over the last few weeks.
"I can't praise DNG and Katie enough, I was already convinced I wanted to go ahead with the QuickBooks set up so on the initial visit Katie just gave me a tour of the site and showed me exactly what to expect. Katie gave me confidence, allowed me to have a 'play' with the programme while she was with me giving hints and tips. I felt totally at ease with Katie almost immediately and I have had occasion to email a couple of queries and have found the response timely and very helpful. I would definitely recommend DNG and QuickBooks."
"With the help and advice from DNG I have now had Xero installed for my accounting purposes. Although this was a worrying prospect for me I have to say that Xero is very straight forward and easy to negotiate. Everything was set up and geared for our purposes and has been a very positive experience. In the event that you require help the explanations and instructions on the help bar are brilliant and written in layman’s terms.
I don’t think I would have progressed so well without the help and support of Jo and Sarah from DNG. They put everything in place and guided me through all the procedures and gave me confidence. So much so that within two months I had ditched my manual accounting books and am doing everything on Xero. Its great to always have someone to ask even this silliest of questions at the end of the phone or emails! Thank you Jo and Sarah!"
"I have had nothing but a positive experience over the past 5 years from DNG. This tax year they have been particularly fantastic at saving me a considerable amount of money and advising on future payments. Their fees are probably the best money I spend every year. I’ve been asked for their details from 2 friends and family as a result. I would thoroughly recommend them as not only do they get good results, they are very easy to work with."
"We have been very impressed with the service we have received from DNG since outsourcing our payroll at the start of 2017. Our payroll/auto enrolment is not straightforward. Not only do DNG deal with the pension complications effectively and efficiently each month, they also identified errors we made in earlier years enabling us to recover nearly £4,000 of overpaid National Insurance contributions. We are pleased to recommend DNG, and their payroll team in particular, for their professional and diligent approach to providing their services to us."
"DNG provided us with invaluable advice and support as we negotiated our way through a recent MBO. They were super responsive and patient with our never ending questions and queries. I wouldn’t hesitate to recommend their services to other small businesses."
"Halcyon has been with DNG since 2000. In that time they have become an integral part of our business success. Not only do they provide the statutory auditing services but they have become our "Critical Friend" - offering advice and guidance at crucial stages of the Company's evolution and development. It's hard to imagine not having them there.
We are delighted with the quality of service they provide - always professional, always timely and always valued.”
"Jones Wholesale have been clients of DNG’s payroll facility for many years and would not think of changing to any other option. The consistency of service received is extremely reassuring and the staff I have experienced have always been efficient and a pleasure to deal with.
To know that calculations and reports will always be accurate and timely is of paramount importance to me and their knowledge and advice on personnel and tax/benefit matters has proved particularly valuable."
"The British Institute of Non-Destructive Testing (BINDT) has used DNG’s services for over 25 years. DNG are active participants in the day-to-day function of the Institute’s Finance and Accounts department.
BINDT is reassured in the knowledge that the staff at DNG are always on-hand with viable solutions and dependable advice for any financial query passed their way.
DNG provide outstanding payroll and budgeting support to BINDT and are consistent in preparing for and providing a thorough audit of the Institute accounts.
The support and services BINDT receives from DNG are second-to-none."
"iSAMS have been working with DNG since 2008 and they were not only chosen on the basis of their excellent reputation locally but also on their expertise in our particular area of activity.
DNG are our ideal partners and have helped us maximise on the exciting growth our business has seen during its infancy. We particularly value the on-site and personal service provided by the Management Accounting and Systems Support team.
We are more than delighted with the services that they provide and would strongly recommend DNG to any company or individuals seeking very professional and friendly advice."
"Barton Petroleum Ltd have been using DNG’s payroll services for many years now and value highly the confidential and personal service which they deliver. Their speedy and efficient resolution of complex queries is particularly appreciated.
DNG represent excellent value for money at a time when all forms of expenses are under the microscope and I would have no hesitation in recommending them as an outsourced bureau."
"DNG’s approach and conscientious attitude have been invaluable to my business and I could not have done without their expertise. Knowing the payroll for my employees, at the Tattoo Club is in safe hands has allowed me to concentrate on other issues within my business.
I pass on my sincere thanks to them and hope that we will continue our business association well into the future."