Beat the end of tax year deadline

Do you have any unused tax breaks?

As the end of tax year approaches if you still want to take advantage of unused tax breaks you may wish consider Individual Savings Accounts (ISAs) and self−invested personal pensions (SIPPs) to transfer shares and other portfolio holdings into these shelters.

Such switches described as &doubleBed and ISAs,” &doubleBed and SIPPING” and &doubleIn specie” contributions or, simply, share transfers allow investors to save tax without having to commit more cash. &doubleIn specie” switches are where investors seamlessly move assets into tax shelters without a formal sale and repurchase and could benefit less liquid holdings.

These transfers protect future income and gains from tax. And, as they are treated as disposals for capital gains tax (CGT) purposes, they are also a way of using up the annual CGT exemption, now £9,200.

Another attraction is that the upfront tax relief on pension contributions means investors can use switches into SIPPs to boost their retirement fund and unlock cash from long−term savings. Each £1,000 of shares transferred into a SIPP is boosted by basic rate tax relief of £282 with higher rate tax−payers able to reclaim another £231 of cash through their tax return.

Moving holdings into tax shelters, confusing though the transfer terminology can be, should be standard practice for helping make portfolios as tax efficient as possible. With transfers into SIPPs the big advantage is the tax relief boost to an investment you already hold.

&doubleIn−specie” transactions could also be a good way of obtaining &double tax relief” on illiquid venture capital trust (VCT) shares.

Investors buying VCT shares at issue benefit from income tax relief, subject to holding them for a qualifying period of three to five years. Once this time is up, shares can be re−registered in SIPPs to gain upfront pension contribution relief as well.

It is also important now to factor the effects of April’s CGT changes into their asset transfer decisions. The scrapping of the indexation allowance makes it potentially advantageous to realise gains on long−term holdings before April. Crystallising losses to reduce gains otherwise taxable at present rates of up to 40 per cent rather than at 18 per cent in future may well also make sense.

Levels and bases of, and reliefs from, taxation are subject to change.