As we approach the end of the tax year (5th April), it's crucial to review your financial situation and make the necessary adjustments to optimise your tax position.
Here’s a guide tailored for employed individuals to ensure you're fully prepared.
1. Review Your Tax Code:
Ensure your tax code is correct. An incorrect tax code could mean you are overpaying or underpaying tax. The standard code is 1257L which indicates you can get the full tax-free personal allowance of £12,570.
However, your allowance may be reduced for several reasons, for example if you receive benefits in kind such as health insurance from your employer that has been reported through a P11D.
If your tax code is not 1257L and you do not understand why or have not received a calculation from HMRC explaining the difference, it is worth getting in touch with them to confirm.
2. Use Your Personal Allowance:
Make sure you're fully using your personal allowance. This is the amount of income you can earn tax-free each year, currently set at £12,570. If you have not been able to use it all and are married to a partner who is a 20% taxpayer, you can transfer up to £1,260 of the allowance to your spouse.
3. Claim Work-Related Expenses:
Claim any allowable work-related expenses, such as uniforms, professional subscriptions, and travel costs.
If your employer does not pay mileage at the standard rate (45p per mile on the first 10,000 miles, 25p thereafter) you can claim the difference in your tax return and receive a tax deduction.
4. Check Your Pension Contributions:
Review your pension records to ensure all your and your employer’s contributions have been put into your pension in line with your contract, payslips and workplace pension rules.
If you earn over £50,270 and pay into a pension, you may be able to claim pension tax relief if your contributions are made after tax.
If you wish to increase your pension contributions, you have until the end of the tax year to make the most of the £60,000 allowance for this year.
5. Check Salary Sacrifice Arrangements
If you have deductions made from your salary through salary sacrifice, such as pension, cycle to work or buying holiday, check that your salary after the sacrifice does not fall below the minimum wage.
This is currently set at £11.44 per hour but rises to £12.21 in April, so check now and again in April.
6. Maximise ISA Contributions:
If you have some money to put away in savings, consider using your Individual Savings Account (ISA) allowance to save up to £20,000 tax-free. This can be cash or stocks and shares. Interest, dividends and any gain from sales are tax-free.
7. National Insurance Contributions (NICs):
Review your National Insurance contributions to ensure you're on track to qualify for the full State Pension. You can check your National Insurance record and top up any gaps if necessary or query gaps that should not be there, for example if you are claiming child benefit.
IMPORTANT NOTE: Currently you can go back as far as 2006 but after 5th April this will be reduced to the last 6 years, so act now to ensure you don’t miss out.
Navigating the complexities of tax year-end can be daunting, but with careful planning and consideration, you can optimise your tax position.
At Drury Accountants, we are here to help you every step of the way. Contact us today for personalised advice and support.
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