Act now to reduce your tax bill before April 2022

Act now to reduce your tax bill before April 2022

Couple HWIFM

Act now to reduce your tax bill before April 2022

It’s that time of year again – have you been thinking about the amount of tax you will be paying this tax year-end?

If you take action before 5 April 2022, there are still ways you can reduce your tax bill and optimise your long-term tax savings.

Find support to reduce your tax bill

Whether you’re managing your own investments or relying on experienced specialist guidance, it’s important to follow financial advice that reflects your personal circumstances.

Whatever your approach, year-end tax planning should be a financial priority to ensure you maximise your income and reduce the amount of tax you pay.

Today, we’ll be looking at three key actions you can take before April 2022 to potentially reduce your tax bill.

HWIFM offers specialist financial advice and guidance on each of these three topics, however, we’d always encourage you to seek out solutions that work best with your own financial situation.

How can inheritance tax planning (IHT) reduce your tax bill?

You may think it’s too early to think about your financial legacy, but putting a plan in place today could help to reduce your tax bill.

If you have assets worth more than £325,000 (plus a £175,000 Main Residence Allowance where applied) at the time of your death, the amount above these limits will be taxed at 40 per cent under IHT law. Even if you’re not yet at retirement age, planning ahead is essential if you want to protect the money you’re earning today.

Every year, you are entitled to give away £3,000 that will remain free from IHT* – the deadline for this year is 5 April 2022.

Inheritance tax can be complex and people often make the mistake of assuming IHT only affects the ultra-wealthy. Considering British citizens paid , it’s clear that’s not always the case.

As inheritance tax planning experts, HWIFM offer our clients bespoke solutions to their specific financial situations. From advising on gifts and trusts to offering specialist guidance on business succession, we offer responsive insights based on your personal financial goals.

With the tax year-end fast approaching, you can still reach out to our friendly, knowledgeable team and take steps to reduce your tax bill and protect your assets long term.

Pensions and tax reduction

Pension planning is another action you can take today that can potentially reduce your tax bill and have some serious long-term benefits.

Most people receive tax relief on their own pension contributions worth up to 100% of their earnings or £3,600 if more each tax year. There is also a limit on total pension funding from all sources, including employer contributions, called the annual allowance. The annual allowance is £40,000 for most people and can be carried forward for up to three years if eligible. If the annual allowance is exceeded, a tax charge is applied to the excess.

After 5 April 2022, you’ll lose the opportunity to carry forward your allowance from 2018/19. If you top up your pension as much as you can before this date, your pension pot may be worth more by the time you need it.

If it’s available to you, a salary sacrifice system could also help by reducing the amount of National Insurance you pay. Your employer will pay extra into your pension pot, effectively reducing the salary you pay National Insurance on.

With tax year-end fast approaching, the decisions you make today could have a far-reaching, positive impact on your finances.

HWIFM offers specialist support in planning for your pension and maximising retirement savings. Taking a personalised approach, we create financial solutions that reflect your individual circumstances.  

How savings and investments can reduce your tax bill

Like any other income, savings and investments can be subject to tax. However, carefully chosen investment schemes that suit your financial situation can reduce your tax bill.

Individual savings accounts (ISAs) are a popular savings method that can help to reduce your tax bill if you take advantage of the annual ISA allowance.

Most ISAs have a £20,000 annual subscription allowance, meaning you cannot deposit more than that figure into one or more of your ISAs throughout a single tax year. If you haven’t hit that limit yet and you’ve still got income sitting in your accounts, consider topping up your ISA to reduce your taxable income.

When considering your savings and investments, it’s also worth making strategic, financial decisions based on your Personal Savings Allowance and Dividend Allowance. Certain trusts can also offer a tax efficient savings model that may reduce the tax you pay.

While you may feel confident navigating the world of savings and investment, HWIFM are savings and investments specialists with a team of experienced responsive advisors who can offer you guidance that’s specific to you.

Smarter tax planning before 5 April 2022

With only a month and a half before the tax year-end on the 5th April, the decisions you make today could potentially save you hundreds or even thousands on your tax bill.

There’s plenty of actions you can take, but the most important thing is that the advice you receive and the decisions you make are based on you and your unique financial portfolio.

If you’d like to learn more about reducing your tax bill, you can get in touch with HWIFM today to book a free consultation with one of our friendly financial specialists.

* Please be aware that the Financial Conduct Authority does not regulate Tax Advice or Inheritance Tax Planning.