Think Ahead and Beat the Taxman
Updated: Oct 26, 2022
We want to prepare our clients to start thinking about the end of tax year deadline – 5th April 2022.
That may be more than five months away, but it’s the most important date in the financial year and we want you to be on the lookout for our end of tax year planning campaign between January and March 2022. We’ll be sending out notices in the new year, encouraging clients to book an early call with their adviser.
Effective tax planning can make an enormous difference to the value of your retirement savings. Not only is it one of the most significant tools we can use to boost your savings, it’s risk free.
We save our clients thousands of pounds in tax every year through our end of tax year meetings, by working together to plan an effective strategy to maximise and protect wealth.
To prepare for this, we urge clients to go through the annual tax check list.
If you’re still working, maximise your pension allowance as much as you can afford, up to the £40,000 annual limit to immediately grow your pension in a way that would otherwise take years. For a basic rate taxpayer, this relief is 20%, so the government will add £10,000 contribution – up to double that if you’re a higher rate tax payer subject to certain criteria. Do note that higher rate and additional rate tax payers do need to claim back the tax relief over and above the 20% basic rate through their tax returns.
If you have unused allowances from three years ago, this is your last chance to use them. Someone who hasn’t paid in anything this year or the previous three could pay in up to £160,000 Gross. Please note - Earnings are subject to certain criteria.
If you're self-employed, pension contributions made to you by your business as an employer are a tax efficient way of extracting profits - you’ll not only save yourself 19% in corporation tax, but also benefit from the pension relief.
There’s also the exchange salary for pension contributions scheme, under which, by mutual agreement with their employer, an employee can exchange some of their remuneration for a larger pension contribution. This saves on National Insurance that would have been paid by both the employer and employee.
Finally, don’t forget your ISA, where dividends and capital growth are income tax and capital gains tax free. You can contribute up to £20,000 to your ISA or ISAs in any tax year, but these allowances can’t be carried forward. It’s a case of use it or lose it.
Don’t forget to ensure that you and your spouse are making the most of your personal allowances. Tax allowances aren’t transferable and those of both partners should be used in full. By using both personal income tax allowances, two people can have a joint income of £25,140 a year tax free.
Also, remember, if you have reached retirement and have no earned income, you can still contribute up to £3,600 gross a year to your pension and benefit from the tax relief.
Our tax planning service is a key part of what we do. Whether you’re a Reeves client or not, please review our catalogue of tax planning content to help you prepare for the upcoming tax deadline:
Reeves Webinars - Five Ways to Reduce Your Tax Bill.
Reeves Webinars - End of Tax Year Planning Checklist Guide.
Reeves Blogs - Exposed: Six Lifetime Allowance Tax Charge Myths.
Reeves Blogs - Should You Take Your 25% Tax-Free Pension Lump Sum?
Reeves Blogs - Seven Ways to Use Pensions to Pay Less Tax.
Reeves Blogs - How to Avoid Paying 55% Tax on Your Pensions!
The deadline for claiming allowances will be upon us all too soon. Don’t leave it until the last minute but – with Reeves’ help – start your planning now and save yourself money. Remember, with tax allowances, it’s use them or lose them, so book your call today.
Remember that investments can go down as well as up and you may not get back the original amount invested. Pensions are a long term strategy and the money invested wont be available until you are at least 55. Pension legislation can and may change in the future.