Now is the time to focus on end of tax year planning
This tax year (2021/22) will end on Tuesday 5th April. There won’t be a Spring Budget this year and Easter is on the 15th of April, so there aren’t any events in the pipeline that will affect your year-end tax planning. However, not all decisions will be quick and easy, so the earlier you start the better. Some of the areas you will need to consider are:
Pensions
By paying into a pension scheme, you are benefiting from full income tax relief and reducing your taxable income. The level of taxable income you have can have an impact on whether you would be liable for the High Income Child Benefit tax charge, or if you would be entitled to a full personal allowance. Tax year-end is an ideal time to reassess how much you are paying into your pension, and the affect this has on any benefits, as you will have figures from your income for the year.
Inheritance tax
There are no current plans to make any major reforms to Inheritance Tax (IHT), so it is now possible to use this framework for your planning. You should pay particular attention to your annual exemptions, including the £3000 for gifts. As nil rate bands have been frozen until April 2026, it may be worth considering taking advantage of these exemptions wherever possible.
Capital gains tax
Similar to IHT, the Chancellor has also recently explained what will be happening with Capital Gains Tax (CGT). No changes will be made to the annual exemption, which currently lets you benefit from CGT-free gains of up to £12,300 each tax year. Tax rates will also not be increased to income tax levels. This has helped to streamline planning for year-end.
Getting advice on your personal finances can take time as it will be important to gather as much data as possible, especially on your pensions. If you are looking for help with your tax year-end planning, speak to a financial advisor at the earliest opportunity.
The value of tax reliefs depend on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax or benefit advice.
The value of your investment can go down as well as up and you may not get back the full amount you invested.
