Tax Year End – Planning with Richard

Richard

Why does it seem that Christmas comes around so quickly? Is that an age thing? Being a father of two young boys, I have already helped them with their Trick or Treat outfits and now we’re talking about Elves!

So whilst many of us are amidst the annual splurge on gi s and other indulgences, we are then confronted by that uncompleted tax return that needs to be submitted by the end of January. (From 6th April 2023 this will replaced by the Making Tax Digital (MTD) initiative.)

With all that head space being filled, it’s easy to lose sight of the benefits of undertaking a little financial housekeeping. A er all, who wants to pay more tax than is reasonable? But it’s worth remembering that allowances and tax reliefs are there to be used and the window to ‘use it, or lose it’ is short.

Here are a few items to tick off your checklist before April 5th 2022: • If you earn £100,000 or more, your tax free allowance reduces by £1 for every £2 above £100,000 until at £125,140 there is no Personal Allowance le . Making additional pension contributions between now and April 5th can help recover your Personal Allowance and result in paying less tax.

• Talking of pension contributions, you can make significant inroads to your retirement planning by ‘carrying forward’ unused allowances from previous tax years. Tax relief up to your marginal rate is available up to the equivalent of your current year’s salary.

• If you own your own business you can make employer pension contributions and these can be offset against your tax.

• A little known allowance called the ‘Marriage Allowance’ allows one spouse with earnings below the Personal Allowance of £12,570 to transfer up to £1,260 of their allowance to their partner. The higher earning spouse must be a basic-rate tax payer for this to be effective.

• Don’t forget to top-up your individual ISA allowance. The cap remains £20,000 for the current tax year and cannot be rolled over.

• With Inheritance Tax, it’s a case of every little helps. Use your annual gi exemption of £3,000 to chip away at that taxable estate. If you didn’t use it last year, you can carry forward the unused allowance to gi up to £6,000.

• For those with young families, don’t forget you can make pension contributions of up to £3,600 per child each year. Junior ISAs are also a great way to give your child’s savings a boost and up to £9,000 can be contributed each year. And if they are aged between 16-18 they can currently have a Cash ISA to a maximum of £20,000 and a Junior ISA (JISA) of £9,000. That’s £29,000 that you can put away in each of these accounts.

• For any substantial expenditure items, consider using your annual Capital Gains Allowance rather than using other sources. It’s up to £12,300 for the remainder of this tax year. Remember that realising capital losses can offset any capital gains you make from other investments.