We’re in the last few weeks before the end of the tax year so now is the time to finalise all your last-minute tax plans. Undergoing a review of your tax plans will allow you to make the most of your allowable deductions and devise strategies to ensure your tax burden is as low as it possibly can be.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
While you should also stay abreast of important tax changes that could affect you, it’s even more important after another year of the COVID-19 pandemic. It might be difficult to keep up with complicated tax rules, but the rewards of a successful tax-planning strategy are significant and well worth the effort.
Here are some ways to help you get your tax affairs in order by the deadline:
Individual Savings Accounts (ISAs)
As of the 2021/22 tax year, your annual ISA allowance is £20,000. You can choose to put all your money into one type of ISA, or you can spread it across the different types:
- Cash ISA,
- Stocks & Shares ISA,
- Innovative Finance ISA
- Or any combination of the three.
And the best part – they’re a great tax-efficient way to hold investments because with an ISA, you don’t pay tax on income or capital gains earned from investments.
Don’t forget about your child’s Junior ISA
Each year, you can contribute up to £9,000 into a child’s Junior Individual Savings account. Money in the ISA builds up free of tax on investment income and capital gains until the child reaches age 18. Once they’re of age, they can withdraw the funds or roll then over into an adult ISA. If the ISA account has not yet reached its limit from your contributions alone, others, such as relatives and friends, can also contribute to your child’s Junior ISA.
Be charitable
If you leave at least 10% of your net estate to charities, you can reduce your inheritance tax (IHT) burden on the remainder of your estate from 40% to 36%. Calculating your estate can be a complicated process, so it’s advisable to seek professional help when drawing up or amending your will.
The IHT marriage exemption
If your child is about to be married, you and your spouse can give them up to £5,000 each, and the best part is that the gift is tax-free.
For an even more generous gift, you can combine this with your £3,000 a year inheritance tax exemption. For a grandchild, an inheritance tax-free gift of £2,500 is allowed for their wedding. All these exemptions apply to a registered civil partnership as well.
Identifying any tax planning opportunities
We’re in crunch time at the end of the tax year so to avoid any last-minute panic, consider working with an expert. Partnering with a trusted financial adviser will help you sort out your tax plan and ensure it aligns with your broader financial goals.
Now is the perfect time to carry out a review of your tax and financial affairs to identify any tax planning opportunities and take action before it’s too late. Everyone’s situation is different, so if you have any questions or if there is a particular area you are concerned about, please do not hesitate to contact us.