New allowances mean that there is now the opportunity for some people to have up to £17,000 of savings income, tax-free. Along with the new £5,000 dividend allowance, that’s potentially up to £22,000 of tax-free income. So, how can you get on board?
The defined order for taxing income can make a difference. Earnings/non-savings income (such as rent) is taxed first. This is followed by savings income, then dividends.
The 0 per cent starting rate band for 2016/17 is £5,000. This is given on savings income as long as it does not exceed the personal allowance of £11,000. So if you have earnings/non-savings income of up to £11,000, you could receive £5,000 of savings income, tax-free. Dividends income does not affect your entitlement to the starting rate tax band. This gives you the option of having thousands in dividends, but also continuing to enjoy £5,000 of savings income taxed at zero.
April 2016 saw the introduction of the new personal savings allowance (PSA).
A basic-rate taxpayer will be able to earn up to £1,000 in savings income, tax-free; for a higher rate taxpayer this figure is £500. Using the PSA, a basic-rate taxpayer could take advantage of the £11,000 personal allowance, plus £5,000 taxed at 0 per cent, plus the £1,000 savings income allowance. This means a potential total of £17,000 in tax-free savings income.
Not only is basic-rate tax no longer deducted at source on bank/building society accounts since April, but the first £5,000 of a person’s dividends income is also tax-free. Why not look at how family members can be used to maximise the benefits available? For a couple, one partner may be lower earner or have less in pensions. If they hold the assets that generate the savings income and dividends, this can help the family qualify for the new opportunities.
Everyone wants to know how to maximise their tax efficiency and enjoy tax-free income. With the pressures of being a dental practice owner, it pays to get expert advice so you can get on with the business of providing high-quality care and a great place to work. Lansdell & Rose are specialists in providing tax-planning advice to dental and medical professionals, as well as business advice. Get professional support to maximise your tax efficiency – there are opportunities for tax-free income out there if you know where to look.
To find out more, call Lansdell & Rose on 020 7376 9333,
Or visit www.lansdellrose.co.uk