As the end of this very strange tax year is fast approaching, now is the time to be thinking about what action can be taken to assist in reducing tax liabilities for the year ended 5 April 2021.
Ensuring that all the appropriate reliefs and allowances have been used should always be a priority as many of these are lost if not used each tax year. In addition, investing in tax efficient products or considering the timing of income and expenses, to name but a few, can also be ways to minimise tax liabilities.
Some examples of where planning can make all the difference are: –
- Reducing taxable income by making gift aid donations or changing the nature of investments i.e. invest in ISA’s or investment bonds to preserve personal allowances or child benefit.
- Alongside the above, review pension contributions to see whether there are any unused allowances from previous years which could be used to make a higher contribution before 5 April 2021 to help reduce taxable income.
- Make sure that, where possible, the savings allowance and dividend allowance are used. The savings allowance allows interest of £1,000 for a basic rate taxpayer and £500 for a higher rate taxpayer to be paid tax free. In addition, dividends up to £2,000 will be liable to tax at 0%.
- Married couples or civil partners should review whether the conditions are met to be able to transfer some of the personal allowance to a spouse or civil partner.
Our useful generic Year-End Tax Planning Guide can be found here.
As mentioned in the guide, the budget is on 3 March 2021 and it is important to bear this in mind when considering any action as the impact of any changes announced will not be known until after then.
If you want to discuss your personal situation in light of the above information, please do not hesitate to contact us.