Last chance for pre-April tax planning
Consider 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?
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!
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.
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.
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:
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
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:
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.
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.
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:
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.