End of year tax planning opportunities in the UK

How Tax Planning Helps you Claim Allowances


Tax filing is never a welcome topic because most people find parts of the process — calculations, review, filing, payment — complex and stressful. However, this task remains unavoidable and has to be carried out each year. Even though most people would rather avoid it, some get ahead of the curve with early tax planning.

While tax planning may not be something you look forward to, doing it on time can benefit you. This blog post will help you understand why tax planning is beneficial to opt for.

Why You Need Tax Planning

Planning your taxes has several benefits. Following are the most prominent ones:

1.    Improves Management of Personal Finances

Planning taxes in advance gives you an idea about your spending, savings, taxes, providing you with enough time to allocate budgets for your routine expenditures. Therefore, tax planning helps you improve the management of your personal finances.

2.    Accurately Calculate Tax Liabilities

Doing everything at the last minute will be stressful and result in mistakes. Hence, planning will help you accurately calculate taxes, saving you from accidentally entering incorrect information during tax filing.

3.    Claim Tax Allowances

Most importantly, tax planning will help you determine which tax allowances you are entitled to, so you may claim them before they expire. It is an excellent way to receive the support you are entitled to.

Allowances You Might Be Entitled To

Following is a list of several tax allowances you might be entitled to but know nothing about:

1.    Spouse’s Personal Allowance

If your spouse does not work or earns less than the designated personal allowance of £12 570, they can transfer £1,260 of their personal allowance to you. It will help you get a tax benefit of up to £250, which is a reasonable amount.

2.    Individual Savings Account Allowance

Investing £20,000 in a bank's savings account allows you to take them out of the tax calculation for the year. If you are married, you can double the amount, invest £40,000 and pay no taxes on the documents.

However, any income you earn on the savings is taxable; hence, your tax will be calculated and deducted accordingly.

3.    Tax-Free Pension Allowance

If you are a retired pensioner, there is a high chance that you don't have to pay any tax on your income from a pension. The only reason you'd have to pay taxes on income from the pension will be if it exceeds £40,000.

4.    Dividend Allowance

Do you have some money invested in stocks that you recently earned a dividend on? Then you are in luck because you can use the dividend allowance to keep a portion of your dividends tax-free. According to last year’s dividend tax law, £2,000 from your total dividend earnings are exempt from taxes.

This allowance is given on top of your personal allowance of £12,570, so you can treat it as a bonus. Please note that the allowance amount can potentially change each year, so always make sure to check it out well before the deadline.

5.    Capital Gains Allowance

Capital gains/loss refers to the difference in property value between purchase and sale. If your property is sold at a higher value than what you bought it for, the difference is considered a capital gain, which is also a form of income, and, hence, is taxable.

However, the UK tax system provides a little cushion to property owners in the form of capital gains allowance, set at £12,300 for this financial year. Therefore, your capital gains tax will be calculated on the total increase minus £12,300. If the increase is lower than or equal to the allowance, you don’t have to pay capital gains tax.

Additionally, sharing ownership of the property with another person will double your allowance.

6.    Property Allowance

You are entitled to £1,000 worth of property allowance on income received from renting out land or property. The sum applies to each property, so if you own and rent out 3 properties, you will get a £3,000 in property allowance.

Furthermore, if the ownership of property is shared, each owner is entitled to £1,000.

7.    Trading Allowance

Entrepreneurs, business owners, and self-employed individuals could claim £1,000 in a trading allowance if they fall under the description mentioned on this website under ‘Trading Allowance.’

However, before claiming trading allowance, you have to take the Self-Assessment to ensure you make the correct claim and benefit from this provision.

Please note that this allowance only applies if you are the sole owner of a business or self-employed. The allowance does not apply to partnerships.

How Gondal Accountancy Can Help

Gondal Accountancy provides efficient tax planning services, and we would be happy to help you with your case and facilitate your tax allowance case. We are accountancy experts and extensive knowledge and experience when it comes to tax planning. Hence, we will manage each aspect of your tax planning and give you the final results once all the work is done.

You can get in touch with our teams if you have any queries. We will be happy to hear from you and answer your questions as soon as possible.

Final Thoughts

In a nutshell, tax planning helps you stay on top of your tax liabilities and allowances and helps you make the best out of the provisions you are entitled to. Additionally, you also remain updated about any changes in the allowance amounts, which allows you to have an accurate picture of your finances.