Check List for Tax Saving
As we are drawing close to the end of 2015, now is a good time to consider some smart tax saving ideas that could defer or reduce your tax bill.
Capital Gains Tax (CGT)
- If you have made taxable capital gains in 2015, you should consider harvesting capital losses now that you may have not yet crystallised in 2015. The capital losses generated should offset the tax on your gains. Of course, this is only a good idea if disposing of the underwater assets now makes commercial sense.
Capital Acquisitions Tax (CAT)
- Each individual can take a gift from you of up to €3,000 each year which is free from CAT and does not use up their tax-free thresholds. Your spouse can also make a similar gift tax-free. When you consider children, grandchildren and sons and daughters-in-law, these €3,000s can add up to a large sum. Consider making these gifts before the year-end, and again first thing in the New Year.
- You may have assets, which are temporarily at a low value. If so, now may be a good time to gift them to the next generation.
Businesses with December year ends
- An employer can give a once a year gift voucher to employees tax free of up to €500 each year. As well as making your employees happy, there is no employer’s PRSI on these payments.
- Consider pension contributions – employer pension contributions are only useful from a tax perspective if they are paid, so ensure that you pay out any pension contributions in advance of the year end.
- Company loans to directors – if these loans are showing an increase at the year end, additional taxes can be payable by the company. Consider paying off directors’ loans before the year end if possible.
- Specific bad debts at year end can reduce your tax liability – it is worthwhile carrying out a thorough analysis of debtors in order to identify bad debts.
- Assuming that you are in a high tax bracket in 2015 you should “bunch and bump” – bunch expenses that you are going to incur in any event into 2015 and bump income where possible to 2016. This includes acquiring – and putting to use – plant and machinery in 2015 to start your capital allowances claims early.
- However, if you are in a low tax bracket in 2015 and are likely to be in a high tax bracket in 2016 – consider doing the opposite to the above and use up any untapped low tax bands.
- Consider making tax based investments such as EIIS investments before the year end.
- Be proactive in ensuring that family members are using up their available lower tax bands and credits. You may wish to move income generating assets to these family members or pay them a salary if this is appropriate to their contribution to the business.
- If you think you may be due a tax refund for 2015, prepare your return early in 2016. In fact, you should do so even if you have a tax liability – it will give you more time to prepare for the payment.
- Consider spreading out your income tax liability in 2016 by paying it by direct debit installments.
- Have you made a Will? If you have a Will, consider if you need to update it.
You will not be able to claim a tax refund for 2011 after 31 December 2015 – if you have been meaning to claim a refund for that year (e.g. due to high medical expenses), now is the time to do it.
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