Doing the simple things well is usually the best way to mitigate risks rather than any grand gesture. This is true in helping to limit the spread of the coronavirus (washing hands, social distancing and staying at home), but it is equally true in the actions an individual can take to limit the financial impact facing us all.
To help, we have set out three simple measures that individuals should be taking now to help them obtain certainty of their tax position in what is a very unsettling time.
1. Complete your tax return
- Now is a perfect time to collate your tax return information: the tax year has just ended; and being in lockdown means that you can deal with the administration that normally gets put off until later in the year.
- Importantly, if you have a liability for the 2019/20 tax year and / or a payment on account due for 2020/21 it will give you time to manage your cashflow more effectively. Once your liabilities are known we can discuss the position and the options open to you (including the Government’s measures for support).
- If you are in a repayment position claiming the refund now, when everyone is feeling the pinch, could aid your cashflow.
2. Make all claims for tax relief
- It is important that all allowable reliefs are claimed. This could include claiming relief for losses on your business, accelerating gift aid relief or perhaps looking to maximise pension contributions. We can ensure that all reliefs due to you are claimed to help improve your tax position. Where possible, we will also look to bring forward reliefs so that they are obtained as soon as possible. Reliefs will only be given when claimed; the sooner the claim, the earlier the relief is received.
3. Review the losses on your investments
Due to the current economic climate you may have incurred losses on some of your investments or they may be showing as having no value. We can review these for you to make sure that all available losses are claimed and in the most beneficial manner. Some examples are:
- Capital loss against income: You may have disposed of shares in a business at a loss. This will normally be a capital loss with relief being given against any other capital gains that you have made (relief at up to 20%). However, in certain circumstances the loss could be relieved against your income rather than capital gains. For a higher rate or additional rate taxpayer, this could more than double the amount of relief received (up to 45%).
- Shares are worthless: Where shares are worthless, but are still held, it may be possible to make a claim to crystallise the loss. This could allow the loss to be made in an earlier tax year than would otherwise be the case. We can help you understand the rules and advise on any claims available to you.
- Loans to traders: Where certain loans have been made to a business and that loan becomes irrecoverable (possibly because the business has failed) a capital loss can be claimed to offset your other chargeable gains. If you have made loans that will not be repaid we can review these for you to determine what tax relief may be available.
Please contact us if you have any concerns about your personal tax affairs or want to know more, as we will be happy to discuss your position to try and help you.