Below is our latest personal tax update…
New Year tax planning ideas
At this time of year, we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5 April.
An obvious tax planning point would be to maximise your ISA allowances for the 2021/22 tax year (still £20,000 each).
You might also want to consider increasing your pension savings before 5 April 2022 as the unused annual pension allowance is lost after three years. For those looking to do some inheritance tax planning, it would be a good time to review (or make) your Will.
In the run-up to the Autumn Budget, many were predicting that the chancellor might announce restrictions to pension tax relief. Thankfully nothing has changed – yet.
For most taxpayers, the maximum pension contribution continues to be £40,000 each tax year. This limit covers both contributions by the individual and by their employer into their pension fund.
Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Thus, the unused pension allowance for 2018/19 will lapse on 5 April 2022 if unused.
Time to review your Will?
Top of the new year to-do list for many individuals is to make or update their will. Many think this is something to leave until later in life, but it is important to get things in place once property is acquired or when children come along.
In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient, and you might want to make specific provisions in your will for your unmarried partner or for the guardianship of your children.
Talk to us about the tax implications of your plans before you instruct a solicitor to get your will drafted or updated.
HMRC have given more time to pay your personal tax
2020/21 income tax, CGT, class 2 and 4 NIC liabilities normally need to be paid by 31 January 2022. However, HMRC has recently announced that provided the tax is paid by 1 April 2022, there will be no penalty, although interest accrues from 1 February 2022 at 2.75%.
If you need longer to pay, then you will need to agree a payment plan with HMRC.
Will there be a mini-budget on 23 March?
Whilst most of us were wrapping our Christmas presents on 23 December 2021, the Chancellor of the Exchequer, Rishi Sunak, commissioned the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast for Wednesday 23 March 2022.
The main Budget is scheduled for Autumn each year, but it is anticipated that the Chancellor will take the opportunity to make a number of tax announcements.
Many are hoping that the Chancellor will zero rate VAT on domestic power to ease the burden of households struggling to pay their energy bills. Now that the UK has left the EU, we are free to set our own VAT rates and the Prime Minister made this one of his key Brexit promises!
If you have any questions relating to the above personal tax-related topics, don’t hesitate to get in touch. You can contact us here.