Getting ready for end of tax year

We are almost in April and that means one thing, end of the current tax year is approaching. So how can you be getting ready for the end of the tax year?  There are a few things to consider over the coming week as the last day of the current tax year is 5^th April 2023 which is next Wednesday.

The tax year end of 5^th April has a long history and tradition.  It was first introduced in 1752. The original tax year end was 25^th March (the usual quarter date). This date was also “Lady Day”, a religious day. With the introduction of the Gregorian calendar (by pope Gregory) in order to keep the number of tax days the same 5^th April came into being.

There have been many calls over the years to modernise our tax system and maybe make 31^st December our tax year just like many other countries.  But we have had too many other pressing priorities in recent times so the issue has taken a back seat for now.  So, for the moment 5^th April it is.

 

Basis period reform

 

The basis period reform is going ahead as planned.  This is confirmation that the current tax year dates stays as they are.

The aim of the reform is to account for profit or loss as per tax year and it will affect those of you who are self-employed or in partnerships.  Although the reform will take effect in the 2024-2025 tax year, the next tax year 2023-24 is a transition year so you need to have this mind.

Full details of the basis period reform can be found here but if you have any concerns do get in touch.  You can email us at enquiries@myersclark.co.uk

 

7 Key considerations for End of Tax Year

 

The end of tax year is also a traditional time to look at your taxes and making sure you have taken all reasonable measures available to save tax.  So here’s the key ones:

 

• Make full use of your ISA Allowance

  • There is a cap on how much you can put in your Individual Savings Account (ISA) each year. For 2022-2023 it is £20,000. Any income or gains in the future from this investment is tax free which is what makes it so attractive.

 

• Maximise your pension contributions.

  • The Annual Allowance is currently £40,000 (set to increase to £60,000 next year). This is the limit up to which you or your employer can contribute to a pension scheme and attract tax relief. If you contribute more then there could be a penalty by way of a tax charge.
  • The advantage of investing in a pension scheme is it attracts tax relief at the point of payment at the basic rate of 20%. You can also reduce your Self – Assessment tax if you are a higher rate taxpayer by attracting a further 20%.  Or get our tax code amended to receive the further tax relief.

 

• Use your Capital Gains Allowance

  • The annual exempt allowance for personal capital gains is £12,300 so any gains on sale of shares or investments up to this amount does not attract any tax.
  • From next Thursday this is reduced to £6,000.
  • If you are thinking of selling shares or investments than it would be a shame to waste this allowance

 

• Move forward the purchase of any capital items

  • During this tax year there is a special allowance called “super-deduction” which attracts 130% tax relief on any capital expenditure made by companies.
  • This allowance is removed next week and for most business there will be 100% Annual Investment Allowance for expenditure up to £1m.
  • If you are a company and are still going to pay tax at 19% next year (profits up to £50K) then it would be worthwhile you making any capital purchases now.
  • For example, if you need a new lap top costing £2,000. Buying it tomorrow would attract tax relief of £494.
  • If you are going to pay tax at 19% after April 2023 it would attract tax relief of £380.
  • But if you are going to pay tax at 25% after April it would tax relief of £500.

 

• Have you claimed Child Benefit

  • We recently did a blog on repaying Child Benefit
  • Wage rises and freezing of tax brackets has meant that many people are experiencing fiscal drag and paying more tax
  • It also means that if you or your partner is earning more than £50K per year then you will need to repay some or all your child benefit via Self-Assessment
  • The onus is on you to tell them i.e. HM Revenue & Customs and register for Self-Assessment if need be

 

• Have you taken any dividends this tax year

  • This tax year you are allowed £2,000 worth of dividends at 0% tax.
  • This falls to £1,000 next year
  • If you have not declared any dividends this tax year then you still have time. Don’t waste the £2,000 allowance

 

• Are you using your £3,000 allowance for Inheritance Tax

  • Each of us have £3,000 gift allowance each tax year also known as annual exemption, but you can carry one year to the next
  • You can gift up to £3,000 tax free each year but it is “use it or loose it” situation
  • The gift needs to be from your income and should not negatively affect your lifestyle.

 

It is difficult always keeping on top of your taxes and always knowing what applies to you and what doesn’t.  We can help with our tax services.  Why not try using our tax checklist to make sure you are making the most of the common opportunities for tax savings.

We would also recommend that you always take professional advice because a tax accountant will make sure they take the full picture of your personal circumstances.

 

Important dates to remember

As we move to next week and into the next tax year there are a few things to remember and a few tasks to tick off.  Let’s do a quick check here:

 

• Final payroll run to be processed on or before the March pay day
• Issue form P60’s to your employees by 31^st May
• Those eligible under the New State Pension, you have until 31^st July 2023 to make up for any missing National Insurance contributions for any gaps between 2006 and 2016
• Update your payroll software after 6^th April
• Complete and submit form P11d for employee benefits by 6^th July
• Submit application for PAYE Settlement Agreement (PSA) by 5^th July
• Register for Self -Assessment if you have a new source of income or subject to High Income Child Benefit tax charge by 5^th October
• Submit your Tax Return by 30^th December if you want any tax you owe via PAYE

 

If you have any questions on anything mentioned here please get in touch with your normal manager.  We look forward to working with you in the next tax year. If you are not yet working with us and would like to learn more about us have a look at how we work