Top 5 Things to Do Before the New Tax Year

The new tax year is approaching quickly, so here are the top five things we recommend for you to do before it starts:


1. Utilise your tax-free dividend and personal allowances


Everybody has an annual tax-free personal allowance of £12,750 and an annual tax-free dividend allowance of £2,000. Therefore, if you run your own company, you may be able to extract any profits as a dividend with the first £2,000 being tax-free. Any dividends that fall within your tax-free personal allowance will also be tax-free.

Dividend income tax rates are much lower than income tax rates for employment income and therefore you should consider how much you will pay yourself as a salary and how much you will pay yourself as a dividend in order to maximise the allowances and rates available.


2. Check your entitlement to marriage allowance


If you are married, or in a civil partnership, claiming this allowance can save you tax of £250. To be eligible, one of you must be a non-taxpayer and the other must be a basic rate taxpayer (earning less than £50,270). The partner who does not pay tax can transfer up to £1,260 of their tax-free personal allowance to their partner.

Marriage allowance claims are made online and you can backdate these for up to four years.



3. Utilise your ISA and pension allowances


Everybody has an annual tax-free pension contribution allowance of £40,000. However, additional rate taxpayers may be subject to tapering meaning that their annual tax-free allowance is reduced. Unused pension allowances can be carried forward for up to 3 tax years.

Additionally, everybody has an annual tax-free ISA allowance of £20,000. So, if you can afford to, consider making extra pension contributions and payments into your ISA, before the end of the tax year in order to fully utilise your allowances. (Speak to a financial adviser about how much you should be paying into both).


4. Utilise your capital gains tax allowance


Everybody has an annual tax-free capital gains tax allowance of £12,300. This means that if you dispose of or sell any assets (such as property, stocks and shares or cryptocurrency) you won’t be taxed on the profits if they are below this amount and you won’t need to report the gains to HMRC.

Consider selling investments before the end of the tax year in order to fully utilise your captain gains tax allowance.


5. Consider lifetime gifts


Everybody has an annual tax-free lifetime gift allowance of £3,000. This means that you can gift this amount without being liable for inheritance tax in the future. You can also carry over your allowance from the previous tax year, making the maximum amount £6,000.

There are also other exemptions such as no inheritance tax on wedding or civil partnership gifts up to £5,000 to your children and £2,500 to your grandchildren.


If you have any questions or would like BW Business Accountants and Advisers to assist you with any of the above, please get in touch.