2020/21 is drawing to a close, with a Budget now slated for early March. Ahead of that, HMRC is easing some of its traditional deadlines in the light of the ongoing pandemic.
If you’re struggling to prepare your self-assessment tax return due to the effects of the pandemic, you may get some relief. It has been reported that HMRC will consider being affected by Covid-19 as a reasonable excuse for anyone filing late returns or making late payments this year. Any fines may be waived if you explain how you were affected in your appeal. You must still make the return or payment as soon as you can. The Chancellor is also apparently considering extending the filing deadline for everybody, moving it from 31 January to 31 March, but this has yet to be announced.
The timing of the tax year end, however, is fixed. Immune to weekends and holidays, it always falls on 5 April, which will coincide with Easter Monday in 2021. The odd date stems from the combination of the ancient British tradition that New Year’s Day coincided with Lady Day (25 March) and the introduction of the Gregorian calendar across the British Empire in 1752.
The timing of the Budget is considerably more variable. Currently scheduled for every autumn, it is, however, subject to other forces. In 2019, the election got in the way and pushed the Budget to March 2020. A similar time lapse has occurred again, because in autumn 2020 the Chancellor chose to wait until the economic fallout from the pandemic was clearer. Shortly before Christmas he confirmed the Budget would be on 3 March.
This year’s Budget could mark the start of measures to restore the public finances, adding to the importance of sorting out your year end tax planning before the Chancellor rises to his feet. Among the areas to consider are:
- Top up your pension contributions. For many years there have been rumours that tax relief on contributions could move to a fixed rate, disadvantaging higher and additional rate taxpayers. The pandemic might be the reason the change finally happens in 2021.
- Use your inheritance tax exemptions. The Chancellor has a pair of reports on his desk from the Office of Tax Simplification (OTS) about inheritance tax reform.
- Use your capital gains tax annual exemption. The Chancellor also has a paper from the OTS on capital gains tax (CGT) reform which included suggestions such as reducing the annual exemption from £12,300 to £4,000 and aligning CGT rates with income tax rates.
- Top up your ISAs. With possible CGT increases on the way, the tax shelter offered by ISAs should not be forgotten.
For more information on any of the above and for other year end planning opportunities, please contact us as soon as possible.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
The value of your investment and the income from it can go down as well as up and you many not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as long-term investment and should fit in with your overall attitude to risk and financial circumstances.