As the end of the UK tax year approaches, it’s time for a dive into your finances to make sure you’ve taken advantage of all the available opportunities as well as fulfilling your obligations. Here’s an easy comprehensive list of 20 things to check for personal and business taxes as April approaches.
PERSONAL TAX
CHECK YOUR ISA
You can put up to £20,000 in your own ISA each tax year – and give your spouse a nudge to do the same. For children or grandchildren, it’s £9,000 in a Junior ISA.
ASSESS PENSION CONTRIBUTIONS
Look at your private pension contributions to take advantage of tax relief. For every £80 you contribute, there’s a £20 top up tax relief. Can you increase your contributions next year? You can put in up to either £60,000 or your gross earnings, whichever is the lower. You may also be able to carry unused allowances over from the last three years. If you’re a high earner, the higher rate of relief will likely apply subject to the tapering rules. High earners may be able to bring your taxable income down by putting more money in your pension or making charitable donations.
CHECK YOUR PENSION ENTITLEMENT
Review your National Insurance contributions to ensure eligibility for the full State Pension. It’s easy to apply for a pension projection statement online which will tell you if you have paid enough in to get the full weekly payment after you retire. Consider making voluntary contributions if necessary to fill any gaps. There’s been a small cut in National Insurance recently which means more money to take home – if you don’t need it, stash it away in your pension. If you’ve got an old company pension make this the year you track it down, and if there are lots then seek advice about rolling them into one.
MAX OUT YOUR EMPLOYER PENSION
Your employer must pay at least 3% of an employee’s earnings into a pension. You will pay 5% on top of that so it’s a total of 8%. But check if your scheme allows you to contribute more which might also mean your employer’s amount has to go up, up to a limit.
LOOK AT YOUR TAX FREE ALLOWANCES & CLAIM YOUR TAX RELIEF AND CREDITS
Make sure you’ve maximised the use of tax-free allowances, such as the Personal Allowance for income tax and the Capital Gains Tax allowance. Check your eligibility for tax reliefs and credits, such as Marriage Allowance, Blind Person’s Allowance, and Working Tax Credit. Claiming these can make a welcome reduction to your tax liability.
REVIEW YOUR TAX CODE & ALLOWANCES
Check your tax code to ensure it’s correct and reflects your circumstances. Notify HMRC of any changes such as marriage, divorce, or if you’ve become self-employed.
CONSIDER INHERITANCE TAX PLANNING
Review your Will and seek professional advice on tax-efficient strategies to mitigate potential Inheritance Tax liabilities – the current level is £325k, and you’ll give 40% of everything above this to the Government. This could include making setting up trusts or giving to charity, and you can also gift £3,000 each tax year.
DIVIDEND RATHER THAN SALARY?
If you own a business, consider taking your income as a dividend instead of salary. In this tax year the first £1,000 of dividend income is tax free but from 6th April 2024 it will be halved again to £500. You may also be able to minimise National Insurance contributions (NICs) too.
CONSIDER CAPITAL GAINS TAX
Evaluate any capital gains realised during the tax year from selling assets such as a second home. Utilise the annual CGT allowance (£12,300 as of 2023/24) to offset gains and consider tax-efficient strategies like gifting assets or deferring sales.
CASH VS INVESTMENTS
Interest rates are high at the moment but investments have historically given higher long term results. Talk to your financial adviser about the percentages you’ve got in each, and how to maximise returns.
BUSINESS TAX
ASSESS BUSINESS INCOME & EXPENSES
Determine eligibility for R&D tax relief by identifying qualifying R&D activities undertaken during the year. Claim R&D tax credits or deductions to reduce tax liabilities or receive cash refunds for eligible expenditure.
EVALUATE CAPITAL ALLOWANCES
Assess your capital expenditure on business assets to determine eligibility for capital allowances. Ensure that all available allowances, such as Annual Investment Allowance (AIA) and First-Year Allowance (FYA), are claimed to maximise tax relief on qualifying assets.
CONSIDER RESEARCH & DEVELOPMENT TAX RELIEF
Review all income and expenses incurred during the tax year, ensuring your records are accurate. Check with your accountant that all allowable deductions and reliefs, such as business expenses and capital allowances, are accounted for.
EVALUATE EMPLOYEE BENEFITS & EXPENSES
Review benefits provided to employees, such as company cars, health insurance, and expenses. Make sure you comply with reporting requirements and assess opportunities to minimise tax liabilities on employee benefits.
ASSESS PENSION CONTRIBUTIONS
Review employer pension contributions and eligibility for tax relief. Consider maximising pension contributions to reduce corporation tax liabilities while providing valuable employee benefits.
EXPLORE EMPLOYEE SHARE SCHEMES
Assess the use of employee share schemes, such as Enterprise Management Incentives (EMI) or Share Incentive Plans (SIPs), to reward employees and attract talent while benefiting from tax advantages.
KEEP RECORDS & FILE ON TIME!
Don’t be late with your HMRC submission to avoid penalties and interest charges.
And don’t forget you’re not expected to know it all, even if you’re running your own business. Seeking advice from your financial advisor, tax professional or accountant is the way to go for the most in-depths, personalised, up-to-the minute advice.
