Year End Tax Planning for Individuals

Year End Tax Planning for Individuals

Planning ahead is always important a sit can help us identify any potential issues ahead of time which allows us to make corrections or appropriate contingency plans

This is even more so the case for tax planning as it is important to be aware of what tax opportunities and allowances are available to you or just ensure you’ve covered the wide variety of considerations when it comes to tax.

The time leading up to the end of the tax year is a perfect time to look at your tax profile and make sure you’ve got everything ready, so you go into the next year worry free.

When does the tax year end?

The tax year runs from the 6th of April each year to the 5th of April the following year in the UK. This means it doesn’t follow the calendar year and you should be aware of when the end the tax year is approaching.

However, it is extremely important to start planning early if you are self-employed or have your business. If you have never done a self-assessment before, you must tell HMRC that you are planning on submitting your self-assessment by 5 October.

For self-assessments, you must submit your tax return by y the end of January if you are doing it online and by the end of October if you are submitting a paper return.

Tax Planning Checklist

When carrying out tax planning, there are a lot of areas that you will need to look at to make sure you are covering all of the necessary considerations that may affect how much tax you pay. Ultimately, your tax situation will depend on your personal circumstances, so we’ve provided a list of areas and types of tax that are commonly considered during tax planning.

We will also discuss some the most important considerations and types of tax below.

  • Income Tax
  • Marriage Tax allowance
  • High Income Child Benefit Charge
  • Tax free childcare
  • Dividends
  • Capital gains Tax
  • Inheritance Tax
  • Stamp Duty
  • Savings allowance & ISAs
  • Pension savings

Income Tax

The tax-free personal allowance is £12,570 and it will remain fixed at this figure until 2028. The basic rate tax band is also frozen until 2028 and is fixed at £37,700.

The higher rate tax band, which is also known as the 40% tax band is fixed to £57,271 until 2028.The additional rate (45%) tax band comes into play if you earn over £150,000 but this will decrease to £125,140 by the end of this tax year.

There is however an HMRC policy which they don’t publish in their guidelines which has led to it being known as the ‘hidden tax sinkhole’. This is because it involves 60% income tax and it is caused by the tapering of personal allowances. It essentially means that someone earning between £100,000 and £125,140 could end up paying 60% income tax.

Making yourself aware of how much income tax you are currently paying and calculating is good practise for keeping track of your tax and earnings.

If you are married and your spouse works part-time, therefore earning less that the personal allowance, then it could be possible to transfer 10% of their personal allowance to you. In some cases, this could be really beneficial and even bring you down by a tax band if you’re lucky. We’ll discuss this more below.

Marriage Tax Allowance

This policy only applies if you are basic rate income tax and you partner or spouse earns below the personal allowance threshold of £12,570. It essentially allows the lower earner to transfer £1,260 (10%) of their personal allowance which results in a £252 reduction in tax.

The great part about of marriage tax allowance is it can be applied for up to 4 years prior which can equate to over £1000 in tax reductions. Once you’ve applied, it will automatically be reduced each year, so you won’t need to worry about re-applying.

Inheritance Tax

Inheritance tax can be quite straightforward but there are a lot of intricacies that come into play depending on the make-up and size of the estate in question. The minimum value of an estate and its assets needs to be below £325,000; and this will remain fixed until 2028.

Any estates larger than this will need to pay 40% inheritance tax. There are however instances where the minimum amount can be raised to £500,000 for an individual case.

>Read more about how to reduce Inheritance Tax

Savings allowance & ISAs

It’s important to look into putting savings in an ISA as all income and capital gains are tax free. If you’re over 18 and don’t have a lifetime ISA then your allowance is up to £20,000. Your income tax band also has a savings allowance which will depend on how much you earn, this allows to save this money without necessarily having an ISA account.

There are numerous other financial planning benefits when you open an ISA or start saving more money, so you can reduce your tax while making smart financial decisions that will help grow your wealth.

How Hansford Bell can help you plan for the next tax year

A lot of people mistakenly think that accountants and bookkeepers do tax planning but the most qualified professionals that can help you effective tax planning are actually financial planners. Here at Hansford Bell, we consider ourselves experts tax planning and wealth management.

Whether you’re just looking for help with. Your personal taxes or need help planning taxes for your business then we can help you make sure you’re well prepared for the end of the tax year.

Get in touch with our lovely team today to find out more information

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Our planners are highly experienced and know the industry inside-out. We combine simplified, straight-forward tips and guidance with cutting-edge technology and a comprehensive understanding of your situation. We focus on your finances, so you can focus on living your life.

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