What happens if I do not think about tax planning?

The 31st January self-assessment tax return deadline is rapidly approaching and while it can be very easy to overlook your tax planning until it is too late, now is the perfect time to act.

If you haven’t thought enough about tax planning, you are by no means alone. A recent study found that almost three-quarters of UK taxpayers have not done enough to reduce ‘tax waste’ in the last year.

Taxpayers should explore the numerous tax reliefs available and think about whether or not you are paying the right amount of tax.

Personal tax

When it comes to personal tax planning, a broad range of reliefs and allowances can be applied to the likes of Capital Gains Tax (CGT), business tax and Inheritance Tax (IHT), and each of these should be carefully considered.

CGT, for example, has a reputation for leaving people with a hefty tax bill on disposal of valuable assets. However, careful planning about how and when an asset is disposed of can have a major impact on the size of the bill. Likewise, making careful use of other allowances can see your tax bills shrink considerably.

When it comes to IHT, there are a wide range of allowances and reliefs to take advantage of, such as the Residence Nil-Rate Band (RNRB) – which provides an additional tax-free allowance if you leave your main home to direct descendants – or leaving money to charity, which is exempt from IHT. This means it makes sense to draft your Will with a view to your IHT liabilities.

It is also wise to consider Married Couples’ Allowance and any other helpful tax reliefs which could be appropriate depending on your situation.

Business tax planning

Business taxes have potentially an even greater scope to benefit from careful tax planning, with the way in which you structure your business having a major impact, as well as the ways in which you acquire new businesses and finance expansion.

Taken together, the potential savings for an individual and their business can stretch into the tens or even hundreds of thousands of pounds and beyond, depending on their income.

This means it will come as no surprise that up-to-date research suggests that UK taxpayers are paying £4.9 billion more in tax than they should.

Need advice?

The best way to make sure you are tax-efficient is to periodically review your tax planning and to reassess your liabilities each time your circumstances change, whether in your personal or business life.

To find out how our expert team at McGills can help, please contact us today.