With the tax year coming to an end on 5 April 2021, you have just six weeks left to make the most of your allowances.
If you haven’t done so already, below we’ve highlight some of the more popular ways you can take advantage of what you’re entitled to. Please act fast however because allowances can’t be carried over to the next tax year which means whatever you don’t claim, is lost.
UK residents under the age of 75 can add money to a pension and receive tax relief on it. You’ll automatically get basic rate tax relief (currently 20%) paid into your pension by the government.
If you pay tax at a higher rate, you could get up to a further 25%, but you’ll need to claim it by declaring any pension contributions you’ve made on your tax return.
To make the most of your pension, make sure you’re aware of all the allowances you’re entitled to. If you haven’t used them to the full, there may still be time to top them up. What’s more, you can also start planning how you can use them for the next tax year.
The annual allowance is the maximum you can invest in your pension each year while still being eligible for tax relief. This is currently set at £40,000, or your entire income, whichever is smaller.
Head to The Pensions Advisory Service website for more information about pension tax relief and eligibility.
Dividend and salary planning
If you run a limited company, there are a number of actions you can consider including dividend and salary planning, purchasing capital items to maximise capital allowances, research and development tax credits and more.
You have an ISA allowance of £20,000 which means that you won’t necessarily have to pay any tax, as long as your dividends don’t exceed the dividend allowance, or any interest from cash, funds, gilts or bonds aren’t higher than your personal savings allowance.
Capital Gains Tax
In the 2020-21 tax year you have an annual CGT allowance of £12,300. This means you can sell shares and investments, property and other assets without having to pay any tax on the first £12,300 worth of gains.
For more pre-tax year end planning advice, please get in touch with PKB and we’ll be more than happy to help. You can also download our free tax card which tells you everything you need to know about allowances for the 2020/21 tax year.
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