10 top tax year-end tips for high earners

With the end of the tax year fast approaching, there isn't much time to organise your financial affairs.

Every year many investors and high earners lose out on valuable tax-efficient allowances by leaving things too late.

These 10 handy hints should act as a reminder about what is on offer. There are even ways to claim tax back from prior tax years.

Charitable donations

Charitable donations, as well as doing good, also attract tax relief via Gift Aid. If you are considering being generous, consider which tax year you do it in and remember to tick the Gift Aid box.

Use Capital Gains Tax allowance

This is one of the most underused tax allowances, but up to £11,100 is available to all, tax free every tax year. Be clever with this allowance.

If it gets near the end of the tax year, and the allowance hasn't been used, then why not look at your portfolio and see if there are alternatives to those pregnant with gains.

Many use this allowance to generate a tax-free income. You can also transfer investments to a spouse in order to use any portion of their unused allowance.

Use your ISA allowance

Still one of the best allowances. £15,240 is a generous allowance that can give tax-free growth and income free from any further tax - the ISA could even be inheritance tax free too if invested in an AIM portfolio.

On a typical dividend yield of 3.5%, £533 of income could be generated each tax year. From the 2017/18 tax year the allowance increases to £20,000.

Contribute to pension where possible

Even though the pension allowance has been steadily eroded, using the annual allowance is usually a good thing.

Upfront tax relief, tax-free growth and inheritance tax free status are three benefits - the downside is taxable income when the pension is taken and having your capital tied up until at least the age of 55.

Non-earners also have an allowance of £2,880 each tax year. Those earning over £150,000 will see their annual allowance this year taper down from £40,000 to as little as £10,000.

Those affected should consider contributing to Enterprise Investment Schemes (EIS), venture capital trusts (VCTs) and Seed EIS. Using the carry forward rules shouldn't be forgotten.

Look at EIS or SEIS to reclaim income tax of CGT

There aren't many ways to reclaim tax paid in previous tax years. EIS and Seed EIS are two such ways; previously paid income tax or capital gains tax can be reclaimed, provided this is done within specified time limits.

Investing in EIS allows an investor to reclaim capital gains tax paid on gains made up to three years earlier.

Make use of spouse's allowance

Many high earners have non-earning spouses. If that is the case, organise your affairs tax efficiently so that their valuable tax-free allowances aren't lost.

The personal allowance of £11,000, and the capital gains tax allowance of £11,100 could be utilised by transferring assets to their name.

Contribute to JISA and pension for offspring

Children also get their own long-term investment allowances. Make use of the Junior ISA allowance of £4,080 and the pension allowance of £2,880 before 5 April.

Pay dividends before 5 April

The dividend tax rate increased from 6 April 2016, however everyone, regardless of their income, receives an annual tax-free allowance of £5,000.

Owners of private companies should consider the most opportune time to pay them.

Consider investing in VCTs, EIS, SEIS

For high earners who have already utilised their ISA and pension allowances, more specialised investments are available that can help reduce income tax bills, capital gains tax bills, produce tax free growth and tax-free income.

A total of £1.3 million could be invested in these three investments this tax year offering a tax rebate of £410,000 (for those lucky to earn enough!).

Use gift allowance to reduce value of estate

Every individual can legitimately reduce the value of their estate each year by gifting assets within specified limits. For those with larger estates this could be particularly useful.

Ben Yearsley is investment director at Wealth Club.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.