6 important reasons to start your tax planning at the beginning of the new tax year
As we’re now nearly two months into the new tax year, you may well have pushed all tax planning issues out of your mind. But there are some tangible advantages in getting your 2022/23 planning started now, rather than later in the year. Most of them are straightforward to tick off and could save you money and give you valuable peace of mind.
So, here are six good reasons to start your tax planning early.
1) Completing your self-assessment tax return gets the ball rolling
A great starting point when it comes to getting ahead of the game from a tax planning point of view is to get your 2021/22 self-assessment tax return done now, if you need to complete one. You’ll probably have had a letter from HMRC to let you know if you need to complete a return, but it’s worth checking. There are three good reasons to get this done now:
- It can reveal vital information about your tax affairs.
- It can take time to obtain all the information you require to complete it. For example, you may need to get details from previous employers or from your bank.
- It gives you peace of mind and avoids any last-minute rush later in the year.
The HMRC online submission process is helpful and intuitive and will flag up information you need to provide. So, if you’re unsure of any details, just going through the form will highlight the information you’ll need to get hold of. One handy thing to remember is that once you’ve completed your tax return, you don’t have to submit it straight away. The calculation summary can give you a good overview of your position without having to press “send” immediately.
2) If you owe HMRC money, it helps to know how much
One thing your self-assessment will tell you is how much tax you owe. Finding this out early in the tax year gives you a chance to query the figure. It also means you can plan ahead when it comes to paying what you owe, rather than having to rush up against a deadline to make a sudden payment. If you owe less than £3,000, you can have this collected through your tax code in the next tax year rather than having to pay it as a lump sum.
3) If HMRC owe you money, you should get it as soon as possible
Likewise, if your self-assessment reveals you are owed money, doing your return will expedite the process of getting it. This is especially true if you’re a higher or additional-rate taxpayer and have made pension contributions. Unlike basic-rate relief – that’s paid automatically – you need to claim higher rates of relief yourself.
Since this is relief you’re entitled to, and money you’ll always find a use for, it makes sense to claim it as soon as you can. It’s far better to have the money working for you, rather than sitting in the Treasury coffers!
4) It’s the ideal time to check you aren’t paying too much tax
Another key step at the start of a new tax year is to check you’re paying the right amount of tax. To do this, simply go onto the government website and confirm that all the details they are using to calculate your tax code are up to date and correct. You’ll then have the chance to flag up any discrepancies and start the process to get it amended if necessary.
Again, it’s best to do this now rather than later in the year. You may well find you’re paying too much tax and, with the current cost of living crunch, a reduction in your outgoings could make a helpful difference to your finances.
5) Paying into an ISA now can add value to your investments
Every individual can make an annual payment of £20,000 to an Individual Savings Account (ISA). To encourage people to save money, the government have made ISAs a very tax-efficient way to invest. You can take money from your ISA free of both Income Tax and Capital Gains Tax.
You may well have got into the habit of making an ISA contribution at the end of each tax year, but paying it at the start instead can be financially rewarding. For example, London Stock Exchange figures show the FTSE 100 increased by 9.8% between the start of the 2021/22 tax year and the end. So, if you’d paid your £20,000 ISA subscription into a hypothetical simple index tracker at the start of that tax year, rather than the end, your investment would have grown by £1,960. Note that this is a gross figure and doesn’t take into account any investment charges.
If you can’t pay your full ISA allowance now, consider making a smaller contribution at this stage, or set up monthly payments. The sooner you invest, the sooner you start gaining the advantage.
6) It’s a good time to boost your pension contributions
Tax relief makes investing into a pension an effective way to save for your retirement. As your pension fund is likely to form the bulk of your income when you stop working, it’s wise to maximise contributions.The start of a new tax year is the ideal time to review how much you’re contributing.
If your salary has gone up, you should look to increase your pension contributions by the same percentage amount. If you’re in a scheme through your employer based on a percentage of salary, this will happen automatically. But if you have your own arrangement, be sure to keep track and give your pension fund a boost.
Additionally, pension contributions can be a great way to maximise tax advantages with any money you receive from HMRC once you’ve gone through the other steps you’ve read about in this article.
Get in touch
If you’d like to find out more about how we can help you with your tax planning arrangements, get in touch. Email email@example.com or call us on 01454 632495.
The information contained in this article is based on the opinion of Aspira Corporate Solutions Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy. You should seek independent financial advice before embarking on any course of action.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.Back To List