Making the most of your tax allowances for the 2021/2022 tax year

03.03.2022

Private Client

The end of the 2021/22 tax year is fast approaching, what should I be thinking about? 

Make plans to manage your tax liabilities for the current tax year ending 5 April 2022 now whilst current reliefs, exemptions, and allowances are still with us.  There are allowances, relief, and exceptions across income tax, capital gains tax, inheritance tax, and VAT, have a read and see how you can benefit

Income Tax 

• Dividend tax rates are set to increase from April 2022; for owner-managed businesses, now is the time to review profits with a view to paying dividends. 
• If your total income is likely to exceed £100,000, making Pension Contributions and Gift Aid donations to charities can preserve your personal allowance to avoid an effective tax rate of 60%. 
• Ahead of suspected changes to pension tax relief, determine your unused pensions allowance from the last three tax years to calculate the maximum you could pay in 2021/22. 
• If one spouse pays tax at a lower rate than the other, transferring assets between spouses may achieve income tax savings.   

Capital Gains Tax (CGT) 

• Gifting assets (i.e. UK land, property, or listed shares) to charities does not give rise to a CGT bill.  You may also be able to claim income tax relief on the value gifted. 
• Consider transferring assets between spouses, free of Inheritance Tax and CGT, to make the best use of capital losses, the CGT annual exemption, and to possibly benefit from lower rates of CGT, prior to final disposal.   
• Don’t forget that the disposal of UK residential property needs to be reported and CGT paid to HMRC within 60 days of completion of sale!   
• Claim capital losses on assets/investments which are now worthless (this can include an irrecoverable loan to a trader).  In certain circumstances, the loss can be claimed against income. 

Inheritance Tax (IHT)  

• Make use of IHT exemptions while they are still with us, in their current form – especially the annual exemption of £3,000 (per donor) and the valuable gifts out of excess income which does need to be carefully managed. 

VAT 

• Making Tax Digital for VAT comes into force for all VAT registered taxpayers from April 2022; make sure your accounting records are compliant for the first VAT Return period after 1 April 2022. 

If you would like one of our tax advisers to help you navigate through the minefield, call 01223 810100 or email us help@cklg.co.uk for friendly help and advice.     

For those of you that have not yet filed your 2021 Tax Return, do it before 28 February 2022 to avoid late filing penalties.  You should also settle any outstanding tax due for 2020/21 by 1 March 2022 to avoid late payment penalties.