The Ultimate End of Year Tax Checklist: 6 Tips to Ensure You Don't Miss Out on Deductions
Make the most of your financial future by taking advantage of the tax year's allowances and exemptions. Don't wait until it's too late - act now and secure your long-term rewards. Check out our essential list of key areas to consider before the tax year ends on April 5th.
The Ultimate End of Year Tax Checklist: 6 Tips to Ensure You Don't Miss Out on Deductions
Boost your pension
Saving for retirement by contributing to your pension pot is a smart move, especially since you can get income tax relief on the money you put in.
The maximum amount you can save into your pension this tax year is generally up to £40,000 or 100% of your salary, whichever is lower. However, if you're a higher earner with an income over £200,000, your annual allowance may gradually reduce to as low as £4,000 this tax year, known as the tapered annual allowance.
If you want to boost your retirement savings, consider:
Topping up your pension contributions before the end of the tax year.
If you don't / didn’t use up all your personal allowance, you can "carry it forward" for up to three years.
Pay into your spouse pension
Pension planning can be a tricky area, so it's a good idea to seek professional advice from a financial advisor who can guide you through the process and help you take advantage of the tax reliefs available. Alternatively, check out Moneysupermarket.com for an overview of how much you need to be saving and more.
Use your ISA allowance
An ISA, or Individual Savings Account, is a type of savings account that allows you to earn interest on your savings without paying tax on the interest earned. The interest you earn on an ISA is tax-free.
Every tax year, you have an ISA allowance that sets the maximum amount of money you can put into an ISA. For the tax year 2022/2023, the ISA allowance is £20,000.
It doesn’t carry over between tax years, so once the tax year ends, any unused allowance is lost.
Boost your State Pension
The number of years you pay National Insurance (NI) for can impact your eligibility for and the amount of your State Pension.
First of all, check your NI record for gaps, you can do that via the Gov.uk website where you can see your National Insurance record to find out if you have any gap, are eligible to pay voluntary contributions and how much it will cost.
People often forget about this but if you're a parent or carer of a child under 12, you should automatically get credits if you claim Child Benefit. We often forget about the non-monetary benefits of signing up for Child Benefit. If you or your partner are registered for Child Benefit you can apply for credits missing from your National Insurance record.
Save for children
Saving for your children's future is a wise financial move!
In the UK, there are two popular options: the Junior ISA and the Junior SIPP (Self-Invested Personal Pension).
A Junior ISA is a tax-efficient savings account designed for children under 18, and allows you to save up to £9,000 per year (as of 2022/23 tax year). The savings grow tax-free and can be withdrawn tax-free when the child reaches 18, at which point the account converts to an adult ISA. Remember that there are two types of Junior ISA: cash and stocks and shares - and you can split your allowance between them or choose one or the other. Stocks and shares Junior ISAs can offer higher returns than cash, but come with the risk of investment losses.
Understand your Capital Gains Tax (CGT) bill
CGT is a tax on the profit when you sell something (an ‘asset’) that has increased in value, for example your investments. The annual tax-free allowance in the 2022/23 tax year is £12,300. The rate you pay after this depends on the level of income tax you pay (10% or 18% for basic rate taxpayers. For higher or additional rate taxpayers, the rate is either 20% or 28%). The new annual exempt amount for individuals for the 2023/24 is £6,000 which is less than half of the previous amount. This is being further reduced to £3,000 for the 2024-25 tax year.
Always good to seek some advice here too! Also check out: https://www.gov.uk/capital-gains-tax/rates
Make gifts to reduce your inheritance tax (IHT)
Giving gifts to loved ones is a natural impulse, but did you know that cash gifts can be subject to inheritance tax?
You can give up to £3,000 each tax year without incurring this tax, or up to £6,000 if you're a couple. You can also carry over any unused allowance to the following year.
To reduce your inheritance tax liability, you could consider paying into a Junior ISA or a pension for your children or grandchildren. However, any gifts above the annual limit may still be liable to inheritance tax. It's a good idea to seek advice from an expert on ways to minimize this potential liability.
Taxes aren’t necessarily everyone’s favourite topic, but it’s important to take advantage of the relevant tax year's allowances and exemptions to make your money go further.
For more information on annual allowances and exemptions, visit gov.uk.If you’re after more personalized advice on how to make the most of available reliefs, don't hesitate to seek the guidance of a financial professional. Good luck!