2021 KMA Tax saving checklistTax saving ideas get in quick before 5th April 2021

THE KMA 2021 TAX SAVING CHECKLIST

Below is a list of possible tax savings ideas for you to consider before 5th April 2021.  Read on and download the guide.                          

1 Use the £2,000 Dividend Allowance

If you have dividends more than this, then could you either transfer some of those shares to your spouse (so that they can use their dividend tax allowance) or into an ISA (where the dividends wouldn’t be taxed).

               

2 Use everyone’s Income Tax Allowance     

The first £12,500 of income is tax free so can any income be transferred to your spouse? 

OR another idea saving £250 a year is that basic rate taxpayers who aren’t using all their tax-free Income Tax Allowance can give up to £1,250 (i.e., 10%) of that tax free allowance to their spouse (as long as their income is £50,000 or less).

 

3 Make a donation to charity                               

Higher rate taxpayers should do so before 5th April as it will save at least 20% tax this year.                            

 

4 Pay into a personal pension

Payments made should lead to a tax refund of 20% for higher rate taxpayers. Companies can make payments on behalf of directors – those payments save corporation tax.

Ps Everyone has an annual allowance of £40,000 to pay into a pension – if unclaimed for 3 years it is lost forever…BUT before making any payments check you won’t exceed the £1.055m lifetime allowance.

 

5 Over 55 – draw down pension lump sum

If you’re over 55 then you can draw down up to 25% of your personal pension and it would be tax free. For many this could be quite a generous tax relief. To avoid losing this opportunity to extract part of your pension pot tax free in a very tax efficient way then you could consider taking the pension draw down before the Chancellor withdraws it.

 

6 Don’t lose your Child Benefit

This tax-free benefit starts to be lost at £50k of income – so anyone with earnings over £50,000 could benefit from making pension payments or donations to reduce their taxable income to a level where child benefit isn’t lost.

 

7 Landlords get those repairs done    

If any repairs are needed, then get them done before 5th April as the repair cost could reduce this year’s tax.

 

8 Sell shares to use Capital Gains Tax Allowance                           

To use this £12,300 tax free allowance, you could sell some shares before 5th April before buying the shares back later in the year.                                                        

 

9 Make a payment into an ISA

The annual allowance £20,000 – it may be worth moving any cash/shares into an ISAs to get a tax-free return.

 

10 Under 40 – Pay into a Lifetime ISA

You can put £4,000 a year into a lifetime ISA.

The great news is that any payments are topped up by a 25% bonus from HMRC.               

 

11 Invest in Venture Capital Trust (VCT)

or Enterprise Investment Scheme (EIS)

          or Small Enterprise Investment Scheme (SEIS)

These schemes offer tax relief to taxpayers to encourage them to invest in companies. Assuming the strict criteria are met then the taxpayer will reduce their tax bill by between 30% and 50% of however much they invest.

 

Ps There are other tax saving benefits too but those will depend on the scheme you opt for.

PPS This is a complex area, so specialist advice is strongly advised if you wish to proceed.

 

12 Make a ‘negligible value’ claim                                 

If you made a loss on any failed company shares (e.g., Carillion) then you can claim that loss on your tax return – it could save you capital gains tax in the future.                                                                     

As always, if you’re not sure on anything and would like a chat over a virtual coffee 😊, please get in touch NOW on: 0161 410 0023 or email: David@kmaaccountancy.co.uk who will be happy to help you.

 

Click here for a downloadable pdf copy

 

Disclaimer

This tax saving checklist is designed to alert you to some of the major issues you should be considering and especially before 5th April 2021. It is not a replacement for professional advice tailored to your precise needs and circumstances. It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances.

 

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