End of Year Tax Planning

End of year tax planning is critical.

Now the end of the tax year is fast approaching, we’ve taken the opportunity to remind readers of some useful tips and tricks for getting your taxes in shape for the 12 months ahead.

End of Year Tax Planning: Personal tax

1. New sources of income. Taxpayers with new sources of untaxed income that they started to receive at any time before 5 April 2020 have until 5 October to register with HMRC. This can be done online via the Gov.uk website. Income could be in the form of dividends or rental income, but it also includes one-offs like capital gains
2. Child Benefit. If you or your partner are in receipt of Child Benefit, and one of you earns £50,000 or more, then you could end up having to pay some or all of this back through the tax system. There’s a handy calculator available here
3. Pension Contributions. Generous tax reliefs are available for taxpayers who make personal (ie not through their employer) contributions to their pension fund. The deadline for making the extra payments is 5^th April so there is still time. Talk to you financial advisor for more details
4. Tax Documents. This is the time of year to start gathering your tax documents together. Your employer will send you your P60 and P11D (if applicable) – however as many documents are now held online it is a good idea to download them and store them securely for later reference. Similarly, pension income and investment income details need to be filed, as well as any documentation for expense claims
5. Property investment. Don’t forget there are new rules for property investors coming in from 6^th April, including 30 reporting deadlines for property disposals and further reductions in tax relief on loan interest for residential investors

Tax Planning: Business tax

1. Newly self employed. As above, HMRC need to be notified of this before 5 October, with the tax return being due on 31 January. You may need to make payments on account to HMRC which will involve paying tax in January and July for the following tax year, as well as paying anything that’s due for the year just gone. This can result in unusually high bills in the first year, so returns should be submitted early to avoid nasty shocks
2. Business expenditure. Consider bringing planned expenditure forward so that tax relief can be claimed a year early. This could be for essential maintenance jobs or new capital expenditure, for example. If your business is a limited company then the key date is the company year end, not the tax year
3. Payroll. The payroll system will be changing over to the new tax year which means final submissions for the old tax year. Going forward, employees may well be on new tax codes so watch out for messages from HMRC. Make sure your staff have access to their end of year reports
4. P11Ds. Employees with benefits in kind will have to have these reported to HMRC by 5 July through P11D forms. This will include things such as health insurance, gym memberships and the use of company vehicles, but also less obvious payments like entertaining allowances and other expenses if paid in advance
5. Record keeping. Although many businesses use online systems, most will still have at least a portion of their records in physical form. These need to be kept for six years from the end of the accounting period – 5^th April for most self employed businesses or the company year end. This could be a good opportunity to clear out some of your old records – but don’t forget GDPR rules will require safe disposal

If you need help or advice on your end of year tax planning, get in touch today.