The 5th of April is the end of the current tax year. Now is the time to prepare for this deadline. Some simple steps can help you avoid a higher tax bill, or at least delay the inevitable by up to 12 months.
Make sure you use all of your annual ISA allowance. Any income on savings in your ISA are entirely tax-free, so why put money in an account which is taxable if you haven’t used your tax-free allowance? Consider tax free National Savings products These can be used over and above your ISA allowance. National Savings are effectively saving with the government, so your money is 100 per cent safe, and they have a number of tax-free products available. With savings rates so low at the moment, you may find that you can get a reasonable rate of return with complete peace of mind. Maximise your pension contributions before 5 April Pensions are the most tax-efficient way of saving around, because the government effectively repays any income tax you’ve paid on your pension contributions. Pensions have had a lot of bad press in recent years, with a lot of people relying on property instead, but the housing market crash may mean that people start to realise how good pensions can be. And, at the moment, equities are arguably quite cheap so there is scope for your pension pot to grow even more as the market starts to recover over the next 10 years. Reconsider having a company car Company cars are still popular perks but the decision on whether they make financial sense is a complex one. If you’re offered a company car, consider what value it has to you in financial terms. Take into account the fact your repair bills, road fund and insurance will be taken care of by your employer, but also consider the tax bill you’ll face because such perks are considered as ‘benefits in kind’ by the taxman. Time your dividendsIf you run your own business, take dividends after 6 April (rather than, for example, 31 March) and any Income Tax payable is due a whole year later, enabling you to earn a year of interest on this money before giving it to the taxman.
Martin Dunne is a partner at Sayers Butterworth LLP. He previously worked in the entrepreneurial services division of Ernst & Young, and has over 15 years of experience working with fast-growing, entrepreneurial businesses. He provides practical and commercial advice to clients ranging from start-up stage to AIM-listers in a variety of sectors including retail, property, manufacturing, technology and media.
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