Year-end tax planning 2021/22

5th of April will mark the end of the current 2021/22 tax year and it is therefore important, at the current time, to review an individual’s business and taxation affairs while there is still an opportunity to do so.

Outside of taxation considerations, we would recommend that individuals also use this time to review their Wills and consider putting in place a lifetime power of attorney.

Taxation planning for the current tax year can include:

• Ensuring individuals utilise their personal allowance (of £12,570 each) and basic rate income tax band.
• Utilising the dividend allowance, which taxes the first £2,000 received at 0%.
• Utilising the savings allowance (of £1,000 for basic rate tax payers and which reduces to £500 for higher rate tax payers), whereby the savings income received is taxed at 0%.
• Seeking to equalise income between spouses or civil partners so that income remains under the £50,000 threshold for the high income child benefit charge.
• Utilising ISA allowances.
• Utilising pension contributions.
• Utilising the individual’s CGT annual exemption of £12,300.
• Utilising the annual Inheritance Tax exemptions. Each individual has a £3,000 gift exemption, which can be carried forward for one year, potentially providing an exemption of up to £6,000 from Inheritance Tax. Other exemptions are also available, including for small gifts and marriage. Regular gifts out of income can also be paid and subject to meeting the qualifying conditions will be covered by the Inheritance Tax exemptions.

Some of these examples are covered in more detail in a recent article written by our Senior Tax Manager Lucy Orrow, which is available to view here: Personal Tax Planning 2021/22 – last call to take action

Changes to Taxation Rates

The new tax year commencing on 6 April 2022 sees Income Tax on dividends increasing by 1.25%. National Insurance rates also increase by 1.25% from this date (as a result of the announcement of the new health and care levy).

Owners and shareholders of companies and businesses may therefore wish to consider bringing forward reward where possible, if it results in lower overall taxation liabilities. However, bringing forward payment dates of the reward may also bring forward the payment of the taxation liabilities arising and this may need careful consideration.

For more information on how you can make the most of your tax planning opportunities, please speak to your usual Lambert Chapman LLP contact.