Tax Year End – a Simple Guide to Getting it Right

J Finance Tax Year End

Yes, it’s the end of the tax year again!

Follow our simple guide to ensure you start the new tax year on the right foot!

As April 5th comes around, regular as clockwork, ensure you end the tax year well, and start the new tax year as you mean to go on by asking yourself the following questions:

Could you top up your pension?

Depending on your income, it is possible to put up to £40,000 into a pension pot each year. This can be a combination of your own contributions and those of your employer. Did you know you can carry this allowance forward for up to three years if you don’t add the full amount each year? It’s also possible to boost the State Pension with voluntary Class 3 National Insurance Contributions. Higher earners (over £100,000) should look at upping their pension payments, to avoid losing some or all of their tax-free Personal Allowance.

Have you used all your ISA allowance?

It is possible to save up to £20,000 a year in a cash or stocks and shares ISA (or a combination of the two). Make sure you make use of this before April 5 and see if you can use your spouse’s allowance too. Those under 18 can make use of a Junior ISA, while 16- and 17-year-olds can take advantage of both the Junior and adult cash ISAs.

Could you save on charity donations?

Charity donations attract full tax relief on contribution using Gift Aid or when you pay from your salary or pension using Payroll Giving. Higher earners can claim back the difference between the tax on the donation and what the charity receives. (Add this on your self-assessment tax return).

Have you looked ahead to Inheritance Tax?

Did you know that each person can give up to £3,000 worth of gifts (money or possessions) each tax year, which will avoid the value being part of your estate when you die? So reducing the potential for Inheritance Tax (IHT). This can also be carried forward one year. Inheritance tax applies if the estate is worth more than £325,000.

Do you know what your dividend allowance is?

For anyone who receives dividends that are not from a Stocks and Shares ISA, or if you are a company shareholder or director, note that you can only receive £2,000 worth of dividends free of income tax.

Are you aware of the capital gains tax allowance?

Capital gains tax (CGT) taxes you on profit made when you sell something like a second home or investments. You can make gains up to £12,000 before you will be liable for this, and it applies to each person in a couple, taking your joint allowance to £24,000.

Are you still eligible for child benefit?

There have been a number of cases in the news recently about parents who have been required to pay back thousands of pounds in Child Benefit that they were not entitled to. It is your responsibility to inform HMRC if one of the parents earns £50,000+ as you will not be eligible for the benefit. Be aware also, that you should remember to include not just your salary in this calculation, other income can be considered too, such as pension drawdowns.

Have you filled in a self-assessment tax return?

If you earn more than £100,000 or if you earn more than £50,000 and have been receiving child benefit or if you are self-employed, you must fill in a tax return.

Are you a landlord?

If you’re a landlord, you must fill in a self-assessment form if you earn more than £10,000 before expenses or between £2,500 and £9,999 after expenses.

Do you earn money from overseas investments?

If so, you must declare this on a self-assessment form.

The end of the tax year can be a – ahem – taxing time, so how about a bit of light relief? Excuses HMRC has received for non submission of self-assessment forms and paying tax include, ‘My hamster ate the post’, and ‘I’ve been cruising round the world in my yacht, and only picking up post when on dry land.’ Take a moment from filling in your tax return and read the rest here.

Still unsure if you have done everything necessary as the tax year draws to a close? We are happy to talk your situation through with you.

If you would like to discuss tax, savings or any other financial matters, we will be happy to help. Please contact us without obligation.

Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across England and Wales. If you would like to discuss this subject or any other financial matter, please contact us on 01635 521 300 or email contact@jfinance.co.uk.