With a new tax year approaching, we thought it worth issuing a reminder about the importance of tax planning, and of reviewing your current position before the 2021/22 tax year ends on 5th April, whether personally or in respect of your business.
After a particularly challenging couple of years, investing time now to ensure that any reliefs and allowances that you are entitled to have been utilised and maximised, and to identify opportunities to implement tax-efficient strategies, could help you to be more financially resilient in the year ahead.
For 2021/22, the ISA allowance is £20,000, the Capital Gains Tax (CGT) allowance is £12,300, the Personal Allowance is £12,570, and the tax free Dividend allowance, which is available in addition to your Personal Allowance is £2,000.
As far as business tax planning goes, many who have plans to invest in qualifying plant and machinery should consider if and how they will make use of the ‘super-deduction’. For those keen to secure a 25 per cent deduction on their tax bill, whilst paying Corporation Tax (CT) at 19 per cent, time is running out as, for some companies, April 2022 sees a reduction in the super-deduction benefit.
If you’re a business or charity and your employers’ Class 1 National Insurance (NI) liabilities were less than £100,000 in 2020/21, you may be able to reduce your liability with the Employment Allowance if you have not done so already.
Sticking with NI, employers and employees will see contributions increase by 1.25 percentage points in 2022/23, before the Health & Social Care Levy becomes a separate tax from April 2023, impacting employers’ cash flow and employees’ take home pay. The increase will also apply to those receiving dividends so you may wish to look at bringing forward some payments to this tax year.
Discussing your plans for 2022/23 with an accountant could help you to reduce your liabilities, and to ensure that you are not inadvertently sacrificing worthwhile contributions to your pensions, savings and investments.
This article is for general guidance only and professional advice should always be sought in relation to tax planning.