End of year tax tips

1. Maximise your Individual Savings Account (ISA) with Woodward Financials to avoid unnecessary tax.

It starts with an ISA and for those that started with a £3,000 per year investment back in 2000 and maxed out their ISA could easily have achieved a tax-free ISA pot of over £500,000 and have even become ISA Millionaires. With the allowance being £20,000 per year it is certainly an investment that should not be put off, as come the next tax year you can do another £20,000

For young adults you can allocate £4,000 of your £20,000 to a Lifetime ISA this attracts a 25% bonus and goes along way towards funding a property purchase.

2. Help your children start saving tax-efficiently.

Junior ISA limits have now climbed to £9,000 per year, starting early could make an enormous difference for children and when they become an adult, the Junior ISA converts to a normal ISA.

We can help set this up for you but more importantly we know what to invest you in to give you the best chance to become an ISA millionaire.

3. Topping up your pensions

It is all about tax efficient financial planning, The annual allowance reduced to £40,000 which is set by your relevant taxable income; however, this could be as low as £10,000.

One of our independent financial advisers would be best placed to advise you whether you can or should make a pension contribution.

Unknown to pension savers there is the carry forward rule, which may enable you to maximise you pension contributions by using the previous 3 years contributions.

4. Take your dividends

Receive £2,000 of dividends free of income tax, the dividend allowance lets investors and shareholders receive this each year.

Any dividends taken over this amount would be subject to 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. These rates are set to increase from April 2022 by 1.25%

5. Utilise your capital gains tax allowance.

You do not pay capital gains tax on the first £12,300 of a qualifying asset, any gain over this amount CGT would be due.

So, splitting the gain over a number of tax years is a clever idea as well as using multiple allowances if the assets being disposed of are jointly owned.

6. Inheritance tax gifts

Your personal nil rate band of £325,000 is a good sum to gift over a 7-year period, adding the residence nil rate band if qualifying means that this could increase a couples allowance to as high as £1,000,000 but there may still be a need to cap or reduce your Inheritance tax liabilities, there are many ways to do this, but most don’t give up the annual exemption of £3,000 per year per person, there are additional exemptions from between £1,000 – £5,000 for a wedding and carrying forward the previous unused allowance is a bonus, or even the small gift allowance of £250 to every one you meet.

Get started, do not leave it to the last day of the tax year being the 5^{th of} April, it takes time and, in cases, can take a few weeks to setup. Some of these tips can help with avoiding tax traps but if you like paying tax? do nothing.

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