What are your options?

The new tax year starts 6 April 2022, so you have one month to consider your options, once we pass this date the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned before the 6 April.

Do you fall into any of these categories?

• You have or are thinking about a change in your personal status (single, married, separating, joining or dissolving a civil partnership).
• You claim Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2021-22;
• Your annual income is approaching or above £100,000;
• You have not yet topped up your pension contributions for tax year 2021-22;
• You are self-employed with a 31 March 2022 year-end;
• You are self-employed and are thinking about the purchase of equipment or vehicles; and
• You are the director and/or shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2021-22.

If you do we can help you discuss your options ahead of the 6 April deadline!

The above list is not comprehensive, and we specialise in helping clients with all taxes including PAYE, NIC, VAT, Corporation, Capital Gains, Income and Inheritance tax. Please contact us now!

Don't lose your 2021/22 Personal Allowance

For every £2 that your adjusted net income exceeds £100,000 the £12,570 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%. The restriction applies between £100,000 and £125,140 adjusted net income.

Consider a Salary Sacrifice Scheme

Another way that you could avoid the personal allowance trap and also reduce income tax and national insurance would be to agree with your employer to sacrifice some of your salary in exchange for a tax free, or low tax benefits in kind. Common examples would be additional pension contributions or providing an electric company car in exchange for a lower salary.

We can assist you in setting up a salary sacrifice arrangement correctly as it will involve amending the contract of employment. You may be doing this anyway as many employers are moving to “hybrid” working and changing the days that staff are required to work in the office.

Personal Tax Planning ahead of April 2022

The costs of keeping the country running through covid were huge and inflation is expected to add to the country’s debt, as taxpayers we will be providing the extra cash!

Therefore it will be more important than ever to ensure that you are not paying too much tax – and there are two key areas to look at:

Are you claiming all your allowances?

Tax is complicated, and we may tend to simply rely on HMRC to tell us what we owe them. The fact is that they are only human and HMRC does make mistakes. In particular, they may have forgotten an allowance or two, particularly if your income has fluctuated over the past few months.

It can be well worth looking at your tax return. If you do find errors, there is a relatively simple way to query them.  HMRC has a well-developed and surprisingly efficient appeals system which you can find here: https://www.gov.uk/tax-appeals/decision

Can you reduce your tax liabilities?

If you find that your current assessment is right, it might be time to take a more proactive approach to reducing your tax.

It could be time to:

• Maximise your pension contributions to make full use of tax relief
• Get a detailed pension forecast – to see the effect changes will have
• Make full use of your ISA entitlements
• Look at your investment portfolio and (if practicable) ensure you take advantage of the full £12,300 CGT allowance before 5 April 2022
• For Shareholder/directors, consider the timing of bonuses and dividends to mitigate the planned 1.25% rate increase
• Look at Salary sacrifice arrangements (see ab0ve) which can be particularly effective in mitigating income tax and national insurance contributions

These steps are all entirely legitimate, but the rules and regulations are complicated. Getting expert help may be vital. Please contact us about planning for the April tax changes. We can provide a full tax review which will help identify the marginal tax traps waiting for you – and help you to avoid them.

Own a Business?

Buy New Equipment Before 6 April?

Your business year end, not 5 April, is relevant for capital allowances purposes.

If, however you are running a business and making up accounts to 31 March or 5 April you should consider buying plant and machinery to take advantage of the £1 million Annual Investment Allowance (AIA).

The AIA prvides a 100% tax write off for new and second hand equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new zero-emissions motor car.

If you are running a limited company, remember that new plant and equipment currently qualifies for a 130% tax deduction.

Payrolling Benefits in Kind

HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11D. They have included guidance on registering to use the scheme in their latest employer bulletin.

If employers haven’t already done so they should register online now or before 5 April 2022 to payroll employee benefits for the 2022/23 tax year.

The advantages of payrolling benefits in kind are:

• employers no longer need to submit P11D and P46(Car) forms to HMRC
• simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
• tax deductions in monthly payroll will be more accurate
• tax codes for individuals should change less frequently
• fewer forms for employers to complete at year-end

If you are not yet in a position to move to payrolling you can still move away from legacy paper P11D forms by submitting them online. You can submit them in one click without worrying about posting them to HMRC. It is also a useful first step towards payrolling of benefits in kind and bringing your payrolling processes into the digital age.