Coming so soon after the 31 January self-assessment filing deadline you could be forgiven for thinking that this is a thinly veiled plea to make life easier for accountants next year. Whilst it is true that we would benefit from a more even spread of work throughout the year there could be genuine benefits for taxpayers who think about their tax affairs early. Of course, the tax implications of any action are only part of the story and rarely the main factor in any decision.
Before the 5th April
There are some things that every individual should think about such as:
- Considering making an increased personal pension contribution.
- Considering making charitable donations under gift aid.
- Confirming your position regarding the High Income Child Benefit Charge and whether it might be better to continue or cease receiving the benefit.
If you are a sole trader making up accounts to 5th April, you should consider year end planning ideas such as:
- Considering the timing of any capital spend and whether it may be more beneficial to bring this forward to pre-year end to bring forward the tax deduction.
- Considering the timing of any capital disposals
- If you have any employees, considering making provision for bonus payments to them prior to the year end.
If you are a director and shareholder of a company, you should consider the above before the financial year end of the company. For the purposes of your personal tax return, you should consider the timing of dividends in the context of other expected income; would you benefit from lower tax rates if income is brought forward through an interim dividend or if dividends are deferred until a later tax year.
There are also other more administrative benefits that could also arise. Perhaps, you have previously been required to complete a tax return, but circumstances have changed such you would no longer be required to complete one. Identifying this before the end of the tax year would give you enough time to notify HMRC and avoid the need to file.
After the 5th April
Even after the end of the tax year there are still things that you could do to obtain tax relief in that year including:
- Consider making and carrying back gift aid payments.
- Consider acquiring shares through a venture capital scheme. The Enterprise Investment Scheme and Seed Enterprise Investment Scheme both allow a carry back to save tax in the tax year preceding the year the investment is made.
You could also identify if you have any unused annual pension allowances that could be carried forward and used against additional contributions in this year.
From an administrative perspective watch your mailbox (or inbox) as it is usually in April that you would be sent documents relevant to your tax return such as your P60 from your employer, annual interest statements from your bank and capital gains summaries from any investments. Gather these together in a safe place and send through to your accountant when requested. This will enable them to identify if there is any missing information or reference numbers.
Having your tax return completed as soon as possible after the end of the tax year gives you the greatest time to plan any tax payments needed by the 31 January and avoid any nasty surprises. If it is submitted early enough before the 31 July second payment on account is due it may even give you the chance to see if this could be reduced.
Whilst I hope this gives you food for thought please note that this is only generic advice and you should seek specific advice around your personal circumstances before taking any (early) action.
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Emma Humpage – Insight's Tax Principal