It’s that time of year again… accountants and tax advisers are busy contacting clients to gather the necessary information to prepare their tax returns. Clients are likely doing their best to present what they believe to be all the necessary details and documents in a timely manner, and might even arrange a meeting with their adviser to hand these over.
There is the possibility however, that in providing only what you believe to be necessary, some really important information may not make it on to your tax return; information that could have a significant impact on your tax position now or in the future.
For example, did you know that if you have made investments that haven’t quite performed as you’d hoped, or perhaps the business you invested in has gone into administration, or maybe you bought shares in a company that are now worth next to nothing, that this is information you should be sharing with your tax advisor? Or you might have lent money to a business and now it looks like you’ll never see a penny of it returned, or you’ve guaranteed a loan to a business and the lender has called in your guarantee. These are only a few examples of the variety of situations and scenarios where you could be entitled to claim a capital loss on your tax return and bank a capital gains tax reduction of up to 28% in the future.
You only have four years from the end of the tax year in which the loss was made to claim a capital loss. In some circumstances, it is possible to convert capital losses into income tax losses and claim relief against income tax for the year of the loss and the previous one. Income tax relief can also be claimed on your tax return for interest costs on a loan taken out for the purpose of investing in, or for onward lending to certain businesses. Time limits for claiming relief against income tax are much shorter, so it’s important to identify these as soon as possible, and with income tax rates of up to 45%, claims like these can take some of the pain away from an investment gone wrong.
Have you made sufficient provision for your retirement? Have you thought about putting that cash in your deposit account into a tax-efficient investment such as an ISA? Are you making the most of your annual exemptions and personal allowances? Perhaps you’re thinking about selling a property, your business or an investment; discussing these thoughts with your adviser in advance could help to reduce tax - or wipe it out completely with some relatively straightforward and simple tax planning.
Use this year’s tax return conversation to explore possibilities that could make you a little, or a lot, better off.