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Some things to consider before the end of the tax year

14 February 2022

Article Image HMRC (2)

With the end of the current tax year fast approaching, now is the time to get your affairs in order. Planning ahead and starting early can make a big difference and will help ensure you don’t miss out on some of the opportunities available to you:

1. Self-assessment tax return
HM Revenue and Customs (HMRC) is waiving late filing and late payment penalties for Self-Assessment taxpayers for one month – giving them extra time, if they need it, to complete their 2020 to 2021 tax return and pay any tax due.

HMRC is doing this to encourage taxpayers to file and pay on time if they can, as the department recently revealed that, of the 12.2 million taxpayers who need to submit their tax return by 31st January 2022, almost 6.5 million had already done so.

HMRC recognises the pressure faced this year by Self-Assessment taxpayers and their agents. The penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.

The deadline to file and pay remains 31st January 2022. The penalty waivers will mean that:
·         anyone who has not filed their return by the 31st January deadline will not receive a late filing penalty if they file online by 28th February
·         anyone who cannot pay their Self-Assessment tax by the 31st January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1st April
·         Interest will be payable from 1st February, as usual, so it is still better to pay on time if possible.

For more information on who must complete a return and when (including help filling in your return) please see HMRC – Self Assessment tax returns. Please remember, if you are subject to an annual allowance tax charge you are required to confirm this via the self-assessment process (even if the charge is being paid via your pension scheme) by completing the ‘Pension savings tax charges’ section of the return.

2. Reclaiming higher rate tax relief on pension contributions
If you do not file self-assessment tax returns, you may need to claim any higher rate relief due on personal contributions (not paid by salary sacrifice/exchange or net pay arrangement) by submitting a request to HMRC. HMRC will usually consider backdating claims for up to 4 years. To claim, contact HMRC on 0300 200 3300 or visit GOV.UK.

3. Topping up your pension
If you wish to consider making additional pensions contributions as part of your end of year planning, it is important you take action now. In order for you to determine what can be done in this regard it may be necessary to gather information on all of the pension arrangements to which you have contributed in the current and three previous tax years, and a calculation can then be undertaken to determine any available unused allowances. It is important to remember that since the 2016/17 tax years, high earning individuals could have had their annual allowance reduced. For more information please visit HMRC – Annual allowances .

Important note: If you hold Enhanced Protection or Fixed Protection of your Lifetime Allowance, any new contributions to a pension arrangement would cause this protection to be lost immediately.

4. Utilise your ISA allowance
You can pay a total of £20,000 a year into an ISA in the current tax year. Your yearly ISA allowance expires at the end of the tax year (5th April 2022) and any unused allowance will be lost; it can’t be rolled over to the following year. You can make a lump sum investment before the end of the tax year to utilise any unused allowance.

5. Make IHT free gifts
You can give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’. You can give gifts or money up to £3,000 to one person or split the £3,000 between several people. You can carry any unused annual exemption forward to the next tax year - but only for one tax year.

Read More:
2022 Tax Year End Planning

Stephen McCleary

Who to contact

Stephen McCleary

Stephen McCleary

Stephen is a private client tax adviser specialising in Investments, Pensions, Trusts, Estates and Inheritance Tax, providing advice to clients within the personal financial services department.

Stephen has over 20 years' experience advising clients, both on tax planning and financial planning.

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