The end of 2020/21 is fast approaching - what should I be thinking about?
If your Income Tax is still owing for 2019/20 - you’ll not be charged the initial 5% late payment penalty if you settle your tax liability – or set up a payment plan with HMRC – by 1 April 2021
You should also
- Make plans to manage your tax liabilities for the current tax year ending 5 April 2021 whilst current reliefs, exemptions and allowances are still with us.
Minimise your tax liability
- Making Pension Contributions and Gift Aid donations to charities to preserve your personal allowance to avoid an effective tax rate of 60%, if your total income is likely to exceed £100,000.
- Gifting assets (i.e. UK land, property or listed shares) to charities free of Capital Gains Tax (CGT) in addition to being able to claim income tax relief on the value gifted.
- Determining your unused pensions allowance from the last three tax years to calculate the maximum you could pay in 2020/21.
- Transferring assets between spouses, free of Inheritance Tax and CGT, to make best use of capital losses, the CGT annual exemption and to possibly benefit from lower rates of CGT, prior to a final disposal.
Don’t forget that the disposal of UK residential property needs to be reported and CGT paid to HMRC within 30 days of completion of sale.
- Transferring assets between spouses, if one spouse pays tax at a lower rate than the other, to achieve income tax savings.
- Claiming 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.
- Make use of Inheritance Tax 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.
Spring Budget 2021 - What to expect
There are rumours that the Chancellor could delay increases in headline tax rates on 3 March 2021 to encourage consumer spending - although maybe we should be prepared for cuts in tax reliefs, exemptions and allowances which inadvertently increase the tax take in the future.
How can we help?
Contact us on 01223 810100 - and one of our friendly tax advisers will help you navigate through the tax minefield.