With the new tax year almost upon us, it is a great opportunity to ensure you have utilised your tax allowances, met important deadlines and your current circumstances are tax-efficient. Our Partner, Ian Tongue, looks at some of the important areas you should be considering.

Tax allowances

There are several tax allowances that are lost if not used within a specific tax year. One of the most common ones is the ISA allowance for savings, which allows you to shelter from tax £20,000 per taxpayer per tax year. If you have not yet used your allowance, discuss this with your financial adviser. For individuals, there is a Capital Gains Tax annual allowance, which is lost if not utilised annually and is currently £12,300 for individuals. Therefore, if you are considering disposing of any assets or have high gains that are unrealised on shares, you may want to consider whether utilising the allowance would save you money. A UK taxpayer is allowed to pay into a pension up to £2,880 – £3,600 with the tax credit – in relation to a pension for their spouse or children. This would not form part or your £40,000 pension annual allowance. They may not thank you for it now, but paying this into a pension from an early age for your children should provide them with a significant pension in later life. For those with wealth in excess of the inheritance tax threshold, you may wish to consider giving away part or your estate, and £3,000 can be gifted in total to one or more persons which can actually be carried forward, so this would be £6,000 if you have not previously done this. Therefore, between a couple, you may be able to give away £12,000 without this being sensitive for inheritance tax. If you are thinking of paying into a pension and making gifts, speak to your accountant to ensure that you are within the acceptable limits for inheritance tax purposes.

Trading structure

This is usually the most significant decision when arranging your affairs to be tax efficient. Many consultants use limited companies for their private practices and, no doubt for a substantial number, this will still be appropriate. However, for some, the new tax changes relating to dividends from April 2022 and corporation tax increases from April 2023 will result in significantly more tax being paid and alternatives may need to be considered. One of the key factors here is whether you tend to draw out of the company the majority of the profits. If this sounds like you, then speak with your accountant to see if your current arrangements are appropriate for your circumstances.

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