The UK tax year ends on 5th April 2022 so now is your chance to save some tax with a bit of careful end of year tax planning.
- ISA
The tax-efficient ISA allowance for the current tax year is £20,000 per person. But a married couple can invest £40,000 combined before 5th April. There is no Capital Gains Tax (CGT), no tax on UK income and no need to declare this on your tax return. If you do not make use of your ISA allowance it cannot be carried forward, so as the saying goes “use it or lose it”! Are you a parent or grandparent? Then you can contribute up to £9,000 per year into a Junior ISA for under 18s.
- Pension
For contributions from individuals, then payments into pension schemes is a good way to get yourself out of higher rate tax and into basic rate tax. Any higher rate taxpayers who don't currently contribute into a pension should talk to us or your financial adviser.
Saving into pension comes with great tax benefits. Investments are free from Income Tax and Capital Gains Tax. Pension contributions up to your annual allowance will also receive an automatic 20% top-up from the taxman, and a higher-rate taxpayer can claim back another 20% or 25% through their self-assessment.
Because of the generous tax rules, there is no limit to the amount you can pay into your pension. Each year you can contribute as much money as you earn, usually up to £40,000. If you have not used your annual allowance in the last three years, you may also be able to make extra contributions by using carry forward.
And employers can contribute into their employees' pension scheme, which is free from Income Tax and National Insurance. The contribution also contributes to tax relief for the employer. Payments can be made into director's scheme too.
- Inheritance Tax
You may wish to consider using your annual gift allowance of £3,000. Although you can carry this forward for one year, it is then lost if it is unused. You may have an unused gift allowance for 2020/21 which can still be used until 5th April 2022.
We hope this has helped, but we are always here to help with your tax planning. So, please do not hesitate to get in touch.