Actions to consider before 6 April 2022
The end of the 2021-22 tax year is 5 April 2022. Many of the tax planning opportunities available for 2021-22 will cease to be available once this deadline passes.
The 31 March is also a popular trading year end for many businesses.
Personal tax planning options 2021-22
- If your income is approaching £100,000, perhaps for the first time, exceeding this figure may lead to a loss of part or all of your personal tax allowance (£12,570 for 2021-22).
- If your income is approaching £50,000 you may become a 40% income taxpayer on earnings above £50,270. Additionally, if you or your spouse/partner claim child benefits, and either of your incomes exceed £50,000, some or all of the child benefits received may be clawed back.
- Have you considered your options to maximise personal pension contributions for 2021-22?
- If you are married (or in a civil partnership) and you or your spouse has income below the personal tax allowance (£12,570 for 2021-22), it may be possible to transfer part of any unused personal allowance to their spouse/partner as long as the higher earner does not have income taxed at higher rates.
- Company car drivers whose private petrol is paid for by their employer may be advised to repay any private fuel provided and avoid the car fuel benefit charge for 2021-22. The key is to calculate if the tax saved is more than the cost of any fuel provided for private purposes.
- Company director/shareholders may need to consider any final dividends or bonuses to be taken from their company before the end of the tax year, not least to save the 1.25% surcharge coming in from 6 April 2022.
- If you let furnished holiday accommodation you may want to review your occupancy records to confirm that you still qualify for the Furnished Holiday Lets tax advantages in 2021-22.
Sole traders and partnerships
As the self-employed are taxed on adjusted business profits rather than the amounts they withdraw from the business, it may be beneficial to consider a number of cut-off issues that could lead to reduced tax payments. For example:
- Could slow moving of redundant stock be written off?
- Is there an opportunity to bring forward significant revenue expenditure (repairs etc) or capital expenditure (plant or other qualifying equipment) and therefore reduce taxable profits in 2021-22 rather than 2022-23?
- If there is a likelihood that profits for 2022-23 are going to be lower than for 2021-22, could income/sales be deferred until the 2022-23 year?
Incorporated businesses
The three questions posed for sole traders and partnerships above, may also apply to companies. Additionally:
- If directors’ loan accounts have become overdrawn during 2021-22, consideration should be given to the income tax and corporation tax consequences.
- Could salary sacrifice schemes and other benefits provided be changed to reduce the tax and NIC consequences for employees and employers?
- Companies can also claim the 130% super-deduction for qualifying capital purchases made during the 2021-22 financial year. Although you should have a good commercial reason for investing in new equipment, this is a generous allowance.
- Company owners will need to draw up a balance sheet before the end of the year (31 March 2022) to ensure they have sufficient reserves to cover any final dividend payments being considered.
We can help
The above check-lists do not cover all possible planning opportunities. Much will depend on your personal or business circumstances.
If any of the questions posed in this update have relevance for your personal tax or business tax affairs, please call so we can explore your options. This review will need to be done before the 6 April (for income tax planning) and 31 March if that is your trading year end, so please do call us.
