In the lead up to the 5th April, (the personal tax year end), there are some items that you should think about if you’d like to maximise all of your tax allowances, and save some money:
If you are a limited company, consider reviewing your dividends. As a taxpayer you have £2000 of tax-free dividends available. This allowance is ‘use it or lose it’, so act soon.
You should also review the amount you have been paid in dividends, which in turn could pay for this tax year. This will ensure you are maximising the amount of dividend income you can have at the lower (‘basic rate’) of 7.5%.
If you are currently earning under around £50,000 this is definitely worth reviewing to make sure you are using all of your tax ‘band’.
As a side note, the basic rate dividend tax goes up to 8.75% from 6th April 2022, so is even more worth reviewing now.
If you already use your dividend allowance, then making sure you are timing your dividend payments correctly! You can see more detail on this in our blog.
Most people get at least £500-£1000 of interest a year tax free. If you are likely to exceed this amount, consider putting your savings into an ISA if tax saving is a goal for you. The annual contribution limit for a cash and/or stocks and shares ISA is £20,000 total per tax year at the time of writing.
You have until 5th April 2022 to make any pension contributions within the 2021-22 tax year. There is an annual tax year ‘cap’ for contributions of £40,000 (in most cases). This can save you tax if you are a higher rate tax payer.
If you are a limited company, consider making ‘employers’ contributions directly from the company instead of personal contributions. This will save corporation tax for the company and won’t cost you ‘dividend tax’ personally.
If you or your partner are likely to exceed £50,000 income and are in receipt of child benefit, you could be subject to the High Income Child Benefit Tax Charge.
This means that effectively you can end up repaying all of your child benefit, depending on your level of income. If so, you should consider whether it is worth claiming at all.
This tax kicks in when you are generally Selling the Big Stuff. You need to consider this if you are disposing of several ‘capital’ items such as:
- investment properties
If so, it is worth considering disposing of at least one before the end of the tax year. You have a (tax) yearly allowance that you can offset against your gains, so splitting disposals across tax years can be efficient. The capital gains allowance is £12,300 at the time of writing.
Buying the Big Stuff
Whether your company year or sole trader accounting year ends on 31st March or 5th April, it is usually a good time to bring forward expenditure you might be making soon, such as equipment or vans, to reduce your next tax bill.
Don’t spend money just to save tax, but if you did need to invest in the equipment soon, this is a great time to do so.
You can ‘transfer’ some of your tax-free personal allowance to your other half or visa versa. This can save around £230+ a year in tax when used in the right situation. This can be applied for online.
However, there is a catch. This cannot apply if one of you is paying higher rate tax.
If you are a limited company owner/director, you should review your PAYE (Payroll) salary to make sure you have it set at the most efficient level.
A good amount in the 21/22 tax year, for most people with no other income, would be around £8820 per year. This is worth discussing with a professional (feel free to call us!).
You want to have earned at least £6,240 in most circumstances to have the year’s earning count towards your state pension. This is what’s known as gaining a ‘qualifying year’.
Are you considering
- replacing items
- repairing your property?
Bringing forward this expenditure before the 5th April will get you the tax relief quicker.
Aren’t we all! Consider gifting cash to your loved ones. You can do this for up to £3,000 per year, and it won’t be counted as part of your estate for inheritance tax (IHT) purposes.
More help on preparing for the tax year end
If you have any questions on the above, please give the office a call and chat to one of our accountants about your situation on 02392 240040.
We offer a paid 1 hour, 1-2-1 consultation so you can ask simple questions of our accountants. You don’t have to become a client, so it’s a great way for you to get the help before the tax year ends.