As we approach the end of another tax year, Iain Stevenson considers some quick savings for dentists to take advantage of.
Incredibly, the end of another tax year is fast approaching. But what does that really mean for dentists? What do you need to know? Will you really miss out?
If the answer is: ‘I don’t really know,’ it may well be worth your while asking your financial adviser.
There is a whole range of allowances and opportunities that are only available during the current tax year. If they are not used, most will be lost forever.
The most common ones to consider are as follows.
ISA opportunities
Starting with an Individual Savings Account (ISA). Each person from the age of 18 has the opportunity to invest up to £20,000 in an ISA per year. This is in either cash or stocks and shares.
Sixteen- and 17-year-olds can invest in a cash ISA. Quite simply, this is a form of saving/investing where you can protect the money from income tax and capital gains tax. If you don’t use your allowance in any one tax year, it’s gone.
Then you have a Junior ISA. This provides the opportunity to save for children under the age of 18 years where you will apply no income or capital gains tax while it remains within the ISA.
The limit on this is £9,000 per year and again if you don’t use it, you lose the opportunity for that tax year.
Pensions are a very tax efficient method of saving. But again there are restrictions on the amount you can save each tax year where you can enjoy the benefits of tax relief.
If you are, or have been, a member of the NHS Pension Scheme, you can benefit from advice on how much you can contribute to pensions in any given tax year.
This process is definitely worth doing, as the tax benefits are excellent and really help to build your retirement pot.
Tax exemptions
Don’t forget about inheritance tax – there are very specific allowances you can use to help mitigate potential inheritance tax liability.
One example is the annual gift allowance of £3,000 which you can use in any single tax year. The difference with this allowance is that you can carry it forward into the next tax year if unused. But it can only carry forward for one year and then you will lose it if you don’t use it.
Finally, everyone has an annual Capital Gains Tax exemption. This enables you to make tax-free gains of up to £12,300 in the 2021-22 tax year.
You cannot carry this forward into the next tax year. So making use of your tax-free exemption each year could reduce the risk of incurring a significant Capital Gains Tax liability in the future.
In light of what we’re seeing in the financial landscape, with rocketing utility bills and the cost-of-living crisis looming, taking advantage of these allowances will help keep your hard-earned money out of the taxman’s pocket. Don’t miss the opportunity.
Please remember: tax treatment depends on the individual circumstances and may be subject to change in future. Inheritance tax planning is not regulated by the Financial Conduct Authority.
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