With the 5th of April, the close of the tax year, less than three months away, now is the perfect time to ensure your finances are in order. Use our checklist to help you evaluate your tax strategies for both the current and upcoming tax years and manage your tax liability before the end of tax year.
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.
There are a few key areas to review when tax planning, so be sure to check you’re taking advantage of all the opportunities you have available to you to reduce your tax liability and maximise savings. Here’s a checklist to help you.
Income tax
- Reduce your taxable income as much as possible to avoid a higher tax rate
- Ensure you and your spouse have sufficient income to use your personal allowance
- Reallocate investment capital between you and your spouse/partner in order to reduce tax
Capital gains tax
- Maximise your annual exemption of £12,300 — this allowance expires annually.
- To defer payment of tax, make a disposal after the tax deadline.
- Ensure you use the maximum allowance between you and your partner — assets can be transferred between the two of you.
After an enquiry by the Chancellor to review CGT, the government is expected to make some possible changes to the regulations in the next budget announcement, so this might be the last year with these rules in effect.
Inheritance tax
- Use your full £3,000 annual exemption, this can be carried forward for one year only, so if you have an unused portion from last year, make sure you use it.
- You can make as many £250 gifts free of IHT as you want as long as the recipient hasn’t received any money from the annual exemption pot
- You can also arrange for regular gifts to be made out of your income in order to use the normal expenditure out of income exemption.
Savings and investments
- Use your full £500 or £1,000 personal savings allowances, and your £2,000 dividend allowances.
- If you control the amount of dividend income you receive, such as shareholding directors of private companies, you could consider paying yourselves up to £2,000 in dividends in tax year 2020/21.
- If you close an account right before the end of the tax year, the interest could be brought forward to the 2020/21 tax year, which could help to better use any surplus personal savings allowance or nil rate starting (savings) band for the current tax year.
- Make sure you’ve used your full ISA savings allowance — ISAs and JISAs being £20,000 and £9,000, respectively as this cannot be carried forward.
Pensions
- You’re allowed to carry forward any unused annual allowances for up to three years so confirm you’ve used any unused allowance of up to £40,000 from as far back as 2017/18.
- Tapered allowance rules have recently changed in an effort to increase pension savings and avoid tax charges for groups of taxpayers disproportionately affected by old rules — the threshold income level and the adjusted income level for the tapered annual allowance are now £200,000 and £240,000, respectively.
- Think about making a net pension contribution of up to £2,880 (£3,600 gross) each year for your family members, including children and grandchildren, who do not have relevant UK earnings.
- Compounding means the earlier you start pension contributions, the more you save.
Get planning
Tax planning is an important part of financial planning, but it’s just one part of a solid financial plan. In order to get the most out of your finances, work with a financial adviser who will take every aspect of your plan into consideration and put together the best financial plan for your goals and dreams. Get in touch to ensure you’re ready well before the end of tax tear deadline.
We can help you with tax planning
Investments | Financial Planning | Retirement | Save Tax | Protection |
Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.