Market Deeping accountancy firm Moore Thompson advises of ways to save tax
As 2021 draws to a close many of us will be focused on what the new year will bring, writes Matt Upex of Market Deeping based accountancy firm Moore Thompson.
Although December 31 marks the end of the normal calendar year, for many there is a more important year-end for them to consider- the tax year.
With the Chancellor recently delivering his Autumn Budget, we now know what the future holds for taxation – at least for the time being.
Before the tax year ends on April 5, 2022, everyone needs to ensure that they have fully utilised the allowances and reliefs available to them.
When it comes to tax planning, there are many options to consider - one of which is your pension. Most taxpayers have an annual tax-free pension allowance of £40,000 and a lifetime allowance of more than £1 million.
By paying more into a pension, it may be possible to reduce your taxable income, allowing you to enjoy more of your earnings while saving for the future.
You should also ensure that you make full use of the various ISAs available to you. Every person in the UK enjoys an annual tax-free ISA allowance of £20,000.
Again, transferring money into an ISA could help you reduce your tax bill and is a tax-efficient way to save.
If you own shares or run a business, you can also benefit from being paid in dividends. Everyone has an annual tax-free dividend allowance of £2,000, and even dividend income above this rate is taxed lower than regular earnings.
Finally, some taxpayers may be able to carry over or defer income from one year into new tax years or use a spouse or civil partner’s unused personal allowances to reduce the amount of tax that they pay.
This can be particularly useful for high earners who find themselves in higher tax bands, as it may allow them to reduce their annual income and put them in a lower tax bracket.
Careful tax planning can help reduce your tax bill by thousands of pounds using the various reliefs and allowances offered by the Treasury.
Many taxpayers miss out on this opportunity to save each year, with billions of pounds of relief going unclaimed. To find out how we can help you claim your fair share of tax relief, please contact us.