Bookkeeping Colchester
With 5th April and the end of the UK financial year fast approaching, it is always good to turn your attention to your own tax affairs to ensure that they are in good health. As experts in Accountancy and Bookkeeping services for small and medium sized businesses, we are committed to making sure that everything is in order for our clients in and around Essex. It is great for everyone to understand the implications of a new tax year and to be prepared on a personal level, so we wanted to give our take on things that everyone can do whether you have an Accountant or not.  
Have you ever wondered why the tax year starts on 6th April? The origin dates back to the Middle Ages and Lady Day, which is a religious festival. After some changes and having taken in to account potential revenue loss, the date that we still use today was fixed as the deadline for annual taxation by the Treasury. We are unusual in the global market as most countries follow the calendar year as their tax year. Interestingly, some organisations like the Chartered Institute of Taxation have commented on on the current rules in the past, making a case for change. 
Income Tax 
It is sensible to be aware of the rate at which you will be taxed and your personal allowance, which is £12,570 for the current 2021/22 tax year. Put simply, this is the amount that you can earn tax free. 
Taxable Income 
Tax Rate 
Personal Allowance 
Up to £12,570 
Basic Rate 
£12,571 to £50,270 
Higher Rate 
£50,271 to £150,000 
Additional Rate 
over £150,000 
Here are some ways that you can reduce taxable income by simply planning ahead. You should always seek advice from a registered financial advisor before implementing changes. 
Pension Contributions 
Paying into a pension can be efficient in terms of tax, for example a higher rate taxpayer saving £100 in to their pension with a cost to them of £60. However, you must be mindful of the rules beforehand. There is an annual allowance limit for 2021/22 which is capped at £40,000, so this is the amount that can be contributed to your pension this year whilst receiving tax relief. Crucially the allowance is across all pension schemes that you may have and includes employer contributions. 
You may wish to seek advice from a registered pension advisor and be fully in the know regarding the extent of the various limits around pension contributions, before utilising them to maximise your personal allowance. 
Transferring Allowance to Your Partner 
You can gift assets from which you earn to your spouse or civil partner as long as you are not separated in order to save tax. You will need to familiarise yourself with the rules surrounding this option and seek professional advice if required. 
Donation to Charity 
You are permitted to claim tax relief on cash gifts donated to UK registered charities (and some in other countries). The process works in a similar way to making personal pension contributions. 
ISA Allowance 
Most people are familiar with Individual Savings Accounts (ISAs) on some level. ISAs can contain a variety of investment types and for the current tax year the limit to how much you can save in an ISA is £20,000. The key is that savings in an ISA are tax free, so if you meet the criteria you may wish to speak to a registered financial advisor to learn more. 
Benefit from Government Cash 
Following on with ISAs and where to put your money ,The Lifetime ISA (LISA) is available to 18-39 year olds and the government will add up to £1000 per year. There are many considerations and of course rules, so it always important seek professional advice. 
Saving For Children 
Along with adults, children also have annual tax allowances. The junior ISA allowance, for instance is £9,000 for the current tax year. The money cannot be accessed by the child until they turn 18, at which point the ISA transfers into their name. There is also the junior SIPP, which is a much longer term commitment and may be something that you are interested in. As always, you may wish to speak to a financial advisor to understand the full details. 
Business Taxes  
If you need help with your business taxes whether you are looking to make matters more efficient or simplify the process, we can certainly help. Browse our Testimonials to see what other business owners are saying about Office Minder and if you want to make an appointment, please click below. 
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