Although the calendar year may be ending soon, there are still several more months to go to the end of the tax year.

However, the clock is ticking to utilise all the tax reliefs and allowances available before 5 April 2022 in order to minimise your liabilities.

There are lots of steps you can take to reduce a potential tax bill – but careful planning is needed, which is why it is never too early to review your tax position.

Businesses and their owners need to consider their current position in regards to the following before year-end:

• Dividend Taxation – Have you utilised the zero per cent Dividend Tax Band of £2,000? Don’t forget the dividend tax rate increase next year by 1.25 per cent.
• Corporation Tax – Have you made use of all of the relief and allowances available to you? Have you made a loss or can you carry previous losses over? Corporation Tax rates increase from April 2023 on a tapered scale so make sure you make the most of the current lower rates that are available.
• Capital Gains – Have you used your annual exemption for 2021/22 of £12,300? If you have sold a business or shares in the last year you could make use of Business Asset Disposal Relief, formerly known as Entrepreneur’s Relief, which could cut your Capital Gains Tax bill in half.
• Incorporation – Becoming a Limited Company could offer you a more tax-efficient business structure.
• Capital Allowances – The Annual Investment Allowance will now remain at £1 million until 1 January 2023. You should also take advantage of the Super Deduction if you have made investments in plant and machinery.
• Research & Development tax credits – Businesses claimed more than £5 billion last year – do you have any eligible projects? Thousands of pounds of relief go unclaimed every year by businesses.

As well as reducing liabilities within your business, there are a number of ways to reduce your personal tax bill:

• Inter-spouse transfers – You can maximise capital gains and income tax allowances as well as minimise rates through these exempt transfers.
• Salary vs Benefits – Exchanging part of your salary for payments into an approved share scheme or additional pension contributions could minimise liabilities
• Inheritance Tax – Have you used your maximum gift allowances? You can give up to £3,000 per year without it being added to the value of your estate on death. Not given in previous years? You can backdate this exemption by up to a year, doubling the amount you can give in a single year.
• Charitable and personal gifts – If you leave at least 10 per cent of your net estate to charity a reduced rate of 36 per cent rather than 40 per cent applies.
• Charitable donations – Donations to charity are tax-free and offer tax relief if you donate through Gift Aid or straight from your wages or pension, through Payroll Giving
• Passing on your pension – Update your Will to ensure that your family receives the full benefit of any remaining pension fund.
• Trusts – There have been a number of changes to the treatment of trust funds recently, which are complex – so seek help.

No one wants to see their hard-earned pension targeted by the taxman, so you should also consider the following:

• Protecting your pension – The Lifetime Allowance (LTA) has changed considerably in recent years and currently stands at £1,073,100 for 2021/22.
• Stakeholder pension – All UK residents including children can make annual net contributions of £2,880 per year (£3,600 gross) regardless of whether they have any earnings.
• Pension drawdown – If you are 55 or over, you may be able to start drawing down pension benefits now from a personal pension such as a SIPP, even if you are still working.
• Annual pension allowance – You can invest up to £40,000 a year into a pension tax-free.
• Make tax-free pension contributions – Pension contributions made to employees by an employer are tax efficient, allowing you to claim a business tax reduction. 

There are also a wide range of tax-efficient investment options, which can help to reduce your liabilities. Are you using, or have you considered, the following? 

• ISAs
• Share Schemes
• EIS And SEIS
• Venture Capital Trust investment
• Community investments
• Social Enterprise investments
• Life Assurance bonds
• Offshore bonds

Every person’s approach to tax planning is different and is based around their income, assets and their aspirations.

That is why it is important to speak with an adviser that understands your needs – like our team at Grunberg & Co.