Are You Paying Too Much Income Tax?
Inflation seems to be on the rise, and that means that your regular purchases will use up more of your available income. You can't control inflation, but there are some things that you can control. Before we roll over into the new tax year, it's worth considering how much income tax you're paying and whether you could gain any benefits going forward. Our tax experts at Chesterton House Accounting Services have put together this list of things to consider before the tax year ends and a new one starts in April.
For income tax purposes, the end of the tax year is the 5th of April 2022. This is a key date in the tax calendar as any actions to save income tax (and possibly National Insurance) taken after this date are likely be ineffective for 2021-22.
If you're wondering what you can do to save tax, here are some things to consider before and after the new tax year.
Reasons To Reduce Your Taxable Income For 2021-22
Here are some things to consider about how to reduce your income tax before April...
If your income is approaching and will exceed £100,000 for the first time this tax year, you would be wise to investigate if there are any strategies you could employ to keep it under £100,000; otherwise, you may lose all or part of your £12,570 personal tax allowance.
When receiving Child Benefits, if either parents’ income exceeds £50,000 all or part of Child Benefits may have to be repaid.
If married couples or civil partners are both basic rate income taxpayers, and one party has an underutilised personal tax allowance, part of the unused balance can be transferred to their spouse or partner.
If you're self-employed or in business, consider whether to bring forward or delay purchases depending on your anticipated income. You might need advice on the best actions to take, but there could be savings to be had.
Think about making additional pension contributions before the year end. This might not put money in your pocket straight away, but it will save you tax and help you keep more of what you earn.
Transfer money in to Individual Savings Accounts (ISAs). If you are liable for tax on interest or dividend income from investments, you might be able to save tax by using ISAs. You can invest up to £20,000 a year, and the tax savings can be huge over time.
Other Income Tax Planning Initiatives For 2021-22
Here are some other ideas to consider...
Make sure you are claiming for working from home.
Minimise your benefit in kind tax charges – for example, consider repaying petrol provided by your employer for private journeys and avoid the car fuel benefit charge.
Make sure you maximise your use of tax-free perks.
Consider deferring bonuses for 2021-22.
These tax planning ideas are not the full extent of the options that may be available to you.
The UK tax code is complex and riddled with grey areas. HMRC will be on your case if you under-declare income but may not be so forthcoming about the options you may have to reduce your income tax liability.
Every taxpayer’s circumstances are unique and require individual planning. Here at Chesterton House, our clients have trusted us for over three decades to help them grow, manage, and protect their wealth, and avoiding losing money in tax is part of that service. We find out what is important to you in order to provide you with a personalised plan that will help you achieve your goals. If you would like to discuss your tax planning options, please get in touch with us for a free initial chat here.
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