As the current tax year approaches its end, it's important to take stock of your finances and ensure that you're not missing out on any valuable opportunities to save money on taxes. Whether you're the type of person who leaves things until the last minute or not, you should consider the following checklist of key items to address before the 5th of April deadline.
Firstly, make sure to take advantage of your Individual Savings Account (ISA) allowance. You can invest up to £20,000 tax-free, so don't miss out on this opportunity to save.
Next, check if your spouse or partner has utilized their ISA allowance. They too can invest up to £20,000 tax-free, which means that together, you could potentially invest up to £40,000 in total.
If you have children or grandchildren, consider investing up to £80,000 tax-efficiently in a Junior ISA, as this could be a great way to pass on your wealth to the next generation.
Additionally, review your pension contributions to see if you can contribute the full annual allowance over the last three tax years. This is worth checking, as it may allow you to tuck away more money into your pension.
If you're approaching retirement and planning a large pension withdrawal, consider spreading it over two or more tax years. This could help minimize your income tax liability.
It's also important to remember your Capital Gains Tax (CGT) exemption. Make sure to take advantage of this exemption, as the allowances for the next few years are 2022/23 £12,300, 2023/24 £6,000, and 2024/25 £3,000.
For high earners, consider putting more money into your pension or making charitable donations to lower your taxable income. This could help you hold on to your Personal Allowance and Child Benefit.
To utilise your Inheritance Tax exemption, consider gifting up to £3,000 this tax year. This would ensure that it's not included in the value of your estate and won't be subject to Inheritance Tax.
If you're a business owner, consider taking dividends instead of salary, as the first £2,000 of dividend income is tax-free. You may also be able to minimise your National Insurance contributions.
Again, if you're a business owner, diverting your company's pre-tax profits into a personal pension could potentially reduce your Corporation Tax, Income Tax (including on dividends), and NIC contributions.
By following this checklist, you can ensure that you're taking full advantage of the tax reliefs and allowances available to you.
If you're unsure about any of these opportunities, it's advisable to seek the advice of a qualified financial adviser or reach out to us at Acute Business Advisory to help you make informed decisions based on your individual circumstances.
