6 Things to do ahead of Tax Year End.
If you’re looking to make the most of your finances and reduce your tax bill for 2020/21 now is the perfect time. Our 6 top tips can help you make the most of your current allowances and tax relief, but be quick as they’ll need to be done by the 5th April 2021 or you’ll miss out.
1) PAY MORE INTO YOUR PENSION
Check to see if you can top up your pension contributions. Many people can benefit from tax relief on pension contributions equivalent to as much as 100% of their taxable earnings. Annual allowance limits can complicate the picture, however, so it’s best to seek advice to maximise this tax relief.
Of course, it can be easy to forget about your pension once it’s set up. But topping up payments by even a small amount can really add up over time. If you wish to find out more about adding in more to your pension, speak to your employer or contact your financial adviser.
2) USE UP YOUR FULL ISA ALLOWANCE
You can save up to £20,000 tax-free in 2020/21, so make the most of any leftover ISA allowance before you lose it on 6 April. What kind of ISAs you choose, and how you share your allowance among them, is largely up to you. Opt for whatever combination of cash, stocks and shares, and alternative finance ISAs suits you.
3) MAXIMISE YOUR TAX-FREE PERSONAL ALLOWANCE
Higher earners have their personal allowance reduced by £1 for every £2 of ‘adjusted net income’ over £100,000. There’s no allowance left for those with income above £125,000. But it may be possible to reclaim some or all of it by using excess income to make a personal pension contribution (which will attract tax relief too).
4) MAKE USE OF THE MARRIAGE ALLOWANCE
You could reduce your income tax bill by up to £250 for 2020/21 by sharing some of your personal allowance with your spouse. The marriage allowance applies to married couples and civil partnerships in which one is a non-taxpayer and the other a basic rate taxpayer. Consider claiming if one of you has very little or no taxable income.
To find out more visit the Government website https://www.gov.uk/marriage-allowance
If you pay enough tax, you can choose to donate to charity through Gift Aid. Your chosen cause will receive an extra 25p for every £1 you give. Higher and additional rate taxpayers can get tax relief on grossed-up donations at the rate of either 20% or 25% (the difference between your rate and the basic rate applied to the donation).
Find out more about how donating through Gift Aid can benefit both you and the causes you want to support. Visit the Government website to find out more about tax relief on Gift Aid. https://www.gov.uk/donating-to-charity
6) CHECK YOUR CHILD BENEFIT STATUS
The High Income Child Benefit tax charge comes into effect if your ‘adjusted net income’ (your income before Personal Allowances and after certain tax reliefs) is above £50,000 and you (or your partner) receive Child Benefit. Check to see if increasing your pension contributions would reduce your adjusted net income to below this threshold – letting you keep the full amount of Child Benefit you receive.
To find out more on Child benefit visit the Government website. https://www.gov.uk/child-benefit
How Markland Hill Wealth can help
Ticking off these straightforward tasks could give your finances a real boost in the short-term. If you’re inspired to plan your future contact Markland Hill Wealth for an independent free review of your tax planning and we’ll carry out a thorough review of your current arrangements.
Get in touch with the team through www.marklandhill.com with the subject ‘Tax Planning’ and we will contact you to help guide you through your financial future.
Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change. However, independent confirmation should be obtained before acting or retaining from acting in reliance upon the information given.
- Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed, and can go down as well as up. The value of your plan could fall below the amount(s) paid in.
- If you pay more than 20% tax on some of your income, you can claim additional tax relief either by contacting HMRC or via your self-assessment tax return. If you are a Scottish taxpayer the tax relief you will be entitled to will be at the Scottish Rate of income tax, which may be different from the rest of the UK. Tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future.
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The information in this article should not be regarded as financial advice.