“A bit late in the day, Femi” I hear you thinking. But is it? Some tax planning should happen before the end of the tax year; but the start of a new tax year also presents opportunities. With many people experiencing a drastic change to their circumstances due to the pandemic, it is more important than ever to keep on top of your tax affairs.
If your income is now at a different level than pre-pandemic, you need to re-evaluate any previous tax planning. For example:
- Child benefit – A claim may now be worthwhile if income is below £60,000. Act soon to benefit from a full claim for 2021/22.
- Marriage allowance – A claim may now be possible if neither you nor your spouse/civil partner is a higher rate taxpayer. You can claim for 2021/22 or backdate a claim for three years.
- Working from home – Employees can claim a £26 per month deduction if required to work from home. Claim for 2021/22 or backdate a claim to 2020/21. Although the tax year 2020/21 has ended, some carry backs are possible. Gift Aid donations and SEIS/EIS investments made during the current tax year can all be carried back.
Savings rates hit record lows last year, and many companies cut their dividend payments. You may also have used up savings to replace lost income. Therefore, make sure you and your partner are making the best use of the savings and dividend allowances, and decide whether any ISA saving is still the best option.
You might also have had to realise investments during 2020/21. If you are now facing a CGT bill, it might be possible to crystallise some capital losses to offset against the gains. This is done by making a negligible value claim for assets that have become virtually worthless.
Some simple procedural checks can make a difference:
- Employees – Check your PAYE codes for 2021/22. Your allowance might be too low if deductions have increased (such as professional subscriptions) or taxable investment income has fallen.
- Self-employed – If profits have fallen, you might be able to reduce payments on account. This will reduce the payment coming up in July, as well as obtain a refund from this January’s payment.
A good starting point when reviewing your tax affairs is HMRC’s income tax webpage. This contains many useful links and can be found here.