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Kirk Rice Blog

Tax Reliefs To Use Before 5 April 2021- Don’t Miss OutWritten on February 8, 2021 by Kirk Rice LLP

Tax Reliefs To Use Before 5 April 2021- Don’t Miss Out

With the end of the tax year approaching, we set out below some tax reliefs that you might wish to utilise to benefit from the tax savings that may arise before it is too late.

Potential Tax Reliefs

1 Each person has an annual exemption of £12,300 to set against their capital gains on the sale/gift of property, shares and other chargeable assets. This allowance cannot be carried forward or transferred to another person. So if you are thinking of selling or gifting assets and have a spouse/civil partner, speak with us to see if it is worth transferring the asset to your spouse/civil partner before making any disposals to utilise their annual exemption in addition to your own.
2 Use up your £3,000 IHT gift exemption for the current year (2020-21), and also use the same exemption from the previous year (2019-20), if you have not already done so. The exempt amount may be carried forward one tax year only, after which it is lost. With this in mind, Kirk Rice LLP can offer advice concerning inheritance tax planning, and if this is something you would like to explore, please contact us.
3 Review your pension contributions (including those made via salary sacrifice and those made by your employer) to ensure that you can make full use of the pensions annual allowance. Remember that if you were registered in a UK pension scheme in the three years prior to 2020-21, you have the opportunity to use up any unused annual allowance from those earlier years after using the allowance from the current year. The carry forward is a ‘use it or lose it’ relief and this year is the last year in which you can use up the unused Annual Allowance from 2017-18. This is a complex area so; please speak with us or your IFA if you are unsure how much annual allowance is available to you.
4 Non-earners and children can make net pension contributions of up to £2,880 in the year. The government will add £720 to this level of contribution, so the pension fund’s value increases to £3,600 gross.
5 Contribute to your ISA. The ISA allowance for 2020-21 is £20,000, and for Junior, ISAs is £9,000. Remember that income or disposals within the ISA wrapper will be tax-free, but of course, you should check with either our Financial Services Team or with your IFA to ensure that this is a wise investment to make.
6 Make charitable donations via Gift Aid. If you are a higher rate or additional rate taxpayer, then you will gain income tax relief on your donations.
7 If you made capital losses in 2016-17, which you did not notify HMRC about, or you overpaid tax in that year, you have until 5 April 2021 to submit a claim to HMRC to notify them of the loss or reclaim the tax overpayment, after which the claim will be out of time.
8 For Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) or Venture Capital Trust (VCT) investments, consider making these sooner rather than later to generate an earlier tax repayment or to carry back the relief to the previous tax year. Remember that such investments carry risks, and you could end up losing your investment, so you should consult Michael Powell in our firm, or your own IFA before investing in such companies.

Finally, it is worth considering preparing your tax return earlier in the tax year so that should your tax liability have fallen from that in the previous year, the second payment on account becoming due by 31 July 2021 may be reduced (should you indeed fall within the payment on account regime). If, on the other hand, your tax liability has increased, an early understanding of this will allow you to budget for the additional tax to be paid by 31 January 2022.

If you would like to discuss your what tax reliefs you may be able to access call 01344 875 000 to arrange an appointment or email info@kirkrice.co.uk.

Please note that information is given for general guidance only and specific advice should be taken before acting on any suggestions.

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