It’s nearly the end of the tax year, but you still have time to make a difference to your tax bill!
We’ve put together our 5 top tax tips to help you to pay less personal tax. If you’re looking for ways to reduce your business tax, then we have you covered too, with our blog:
You can also check out HMRC for the latest personal tax rates and allowances, but we would always recommend letting us translate for you!
We would always advise speaking to us directly about any tax planning you are considering, but the following are fairly straightforward top tax tips to help you to look at your personal tax affairs with a view to making sure that you are making the most of tax allowances and reliefs for the current tax year, which ends on 5 April 2022.
1. Use up your Tax Free Dividend Allowance
Every UK taxpayer has a tax free dividend allowance of £2,000 for the year to 5 April 2022. This means that dividends received up to this amount won’t be taxed. This is in addition to your personal tax allowance.
Action: If you are a shareholder in your own company and the company has profits available, make sure the company has paid you dividends up to £2,000 this year.
Be aware that dividend tax is changing from 6 April 2022. Check out our dividend tax blog with all the info.
Considerations: Are there other shareholders in your company affected? Is your spouse or partner using up their tax free dividend allowance? Speak to us for an estimate on how much you can take out of your company in dividends, and how this will affect your personal tax.
2. Consider taking dividends before 5 April 2022
Dividend tax increases by 1.25% from 6 April 2022, so would it be a good plan to take dividends before this?
Speak to your accountant to look at tax planning before we reach the year end
Check out our blog on the changes happening in April 2022
Use up your ISA Limits
An ISA is an Individual Savings Account that is exempt from income tax. For the year to 5 April 2022 you can save up to £20,000 per ISA (Junior ISAs savings limit is £4,368 for 16 to 18 year olds)
Action: Move savings into an ISA before 5 April.
Considerations: Are you using your children’s Junior ISA limits?
3. Transfer Unused Married Couple’s Allowance
If you or your spouse or civil partner are not using your Married Couple’s Allowance (MCA) you can apply to transfer some of the unused allowance up to £1,250 to the other spouse or civil partner. This will reduce their tax by £250.
The personal allowance for the year to 5 April 2022 is £12,570, so if any of this is spare it may be worth considering transferring it.
Action: Check HMRC’s Marriage Allowance Calculator to see if you and your partner would save any tax by transferring the allowance.
Considerations: If one of you earns over £50,000 (£43,430 if you’re in Scotland) you are unable to transfer unused MCA.
4. Make an HMRC Approved Investment
By investing in certain HMRC approved investment schemes you can reduce your tax by 30% or 50% of the amount invested. For example if you invested £10,000 before 5 April 2022 you could reduce your tax bill for the same tax year by £3,000 or £5,000, depending on the type of scheme invested in.
Action: Get in touch with us or Kevin Morris our Independent Financial Advisor to discuss your suitability and requirements.
Considerations: The investment ties up your cash for 3 to 5 years, so make sure you wouldn’t need it before the end of the scheme.
5. Make a Pension Contribution
If you’re a higher rate tax payer with a personal pension, any contributions you make in the tax year to 5 April 2022 will increase your basic rate tax band. This means that contributions will push up your higher rate threshold.
For example, if you’re a higher rate tax payer with an income of £55,000, £5,000 of this will be taxed at higher rate. However, if you make pension contributions of £5,000 this will push up your higher rate tax threshold from £50,000 to £55,000, saving you £1,000 in higher rate tax!
Action: Make a lump sum pension contribution before 5 April.
Considerations: Get in touch with our IFA Kevin Morris Dip FA, to discuss your pension situation. We’ve worked together to save many of our clients corporation and personal tax.
So those are our 5 top tips – do get in touch if you’d like to discuss any of the suggestions further.
We understand there is A LOT to think about here. Please do contact us if you’d like a chat or more info.
In the meantime, if you think you may not be able to afford your tax bill, please check out our blog I’m worried about paying my tax?
Thank you for reading!
**Please note the above content is for guidance only, and should not be taken as specific tax advice. Always get specific tax advice relating to your personal tax situation.