Year-end tax planning

The end of the 2020/21 tax year is fast approaching, and therefore it is important for individuals to consider what tax issues should be considered.

At Dafferns we can assist you in carrying out year-end tax planning which may centre around the following:

• Make use of your capital gains tax annual exemption (currently £12,300)
• Use your annual allowance for pension contributions
• Make the most of your ISA allowance
• Make use of personal allowances
• Where appropriate, consider dividends over a bonus or salary 
• Review your buy to let portfolio structure 
• Plan the High-Income Child Benefit Charge
• Explore the benefits of an electric car
• Plan carefully for any plans to emigrate
• Consider more complex tax-efficient investment schemes
• Use your IHT annual tax-free allowances for gifts 

With much speculation concerning the Budget on 3rd March 2021, we want to highlight potential changes which may be made to Capital Gains Tax (CGT) rates and allowances.

One of the recommendations made by the Office of Tax Simplification (OTS) was to remove or at least reduce the CGT annual allowance, which is currently £12,300. The OTS also recommended closer alignment of income tax and capital gains tax rates.

If the Chancellor equalises rates, this will push the top rate of CGT to 45%, a rise of 25% for higher and additional rate payers. Basic rate taxpayers would face an increase of 10% to 20% capital gains tax, or higher rates on larger gains which are treated as the top slice of income. 

It is therefore worth considering whether to sell assets prior to the budget which have a significant gain, in order to lock in the lower rates of tax. 

Please contact us if you would like us to review your potential capital gains tax liabilities, or any other tax planning points.