End of year tax planning
You can realise capital gains of £12,300 before you pay any CGT. Consider selling any assets or maybe transferring assets to a spouse to use their annual exempt amount.
Personal Allowance for 2021/22 is £12,570. If your income for the year is below this you should consider ways to increase this, making full use of the allowance. This could involve taking pension income or a dividend or bonus.
If your income for 2020/21 is likely to exceed £100,000, you should consider whether you can avoid the 60% marginal rate, by making pension contributions, or charitable donations.
The Marriage Allowance is available where one spouse or civil partner's income is below their Personal Allowance and the other is a basic rate taxpayer.
You can receive £2,000 of dividends tax-free each tax year. If you are a business owner, you should consider whether it is possible to declare a dividend to make full use of this. The tax rate on dividends increases by 1.25% on 6 April 2022 so it may be that you would like to accelerate payment to take advantage of the lower rate.
ISAs are investment products that produce tax-free interest, dividends, and/or capital gains. You can invest up to £20,000 into an ISA each tax year.
If you are aged 18 to 50 (you must start to contribute before you are 40), you can use up to £4,000 of your ISA allowance to contribute to a Lifetime ISA ('LISA') to help save for the deposit on a house. The Government adds a 25% bonus so you can receive up to £1,000 tax-free each year. If not for yourself perhaps consider this for a young person.
Most people are able to obtain tax relief on pension contributions of £40,000 each year (the limit may be lower for low or very high earners). You may also be able to carry forward your unused annual allowance from the previous three tax years.
You have an annual IHT exemption of £3,000 and can carry forward any unused amount from the previous year. Gifts within the limit are fully exempt from IHT even if you do not survive seven years.
If you have a high-income tax or CGT liability or wish to reduce your IHT bill, you may consider investing in tax-efficient investments such as Enterprise Investment Scheme ('EIS'), Seed EIS, or Venture Capital Trusts.
If you have queries surrounding this and would like to discuss further, please contact our Tax Manager, Claire Green or your usual contact.
If you’d like further information on any subjects discussed in this article, please don’t hesitate to get in touch via the form below.
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