Personal Tax Planning for the 2020/21 Tax Year

The start of the new tax year on 6 April 2020 has passed virtually unnoticed against the backdrop of current events.

A further Budget is scheduled for November this year at which the Chancellor is likely to outline his plans to recoup the enormous cost to the country of the financial measures introduced to combat the effects of the COVID-19 virus.

The immediate impact for personal tax payers within the Self-Assessment system who are due to make a payment on account of their 2019/20 tax liability on 31 July is that this payment can be deferred, without penalty, until 31 January 2021.

Changes which come into effect for this new tax year and should be considered as part of any tax planning exercise each year, where relevant, include:

• Pension Allowances – affecting higher earners, the 2020/21 threshold income level before pension relief reduces, has been raised from £110,000 to £200,000 and the adjusted income level has moved from £150,000 to £240,000. This means that for every £2 of income over £240,000, the Annual Allowance decreases to as little as £4000 instead of £10,000;
• Individual Savings Accounts (ISAs) - remain tax free up to a value of £20,000 whether the income is from interest or investments. ISAs remain a flexible investment for many and it may be helpful to talk to your independent Financial Advisor if you want to explore the opportunities further;
• Marriage Allowance – if you earn less than £11,250 and your spouse or civil partner is a basic rate taxpayer you can continue to transfer £1,250 of your Personal Tax Allowance to that spouse or partner, by using the Marriage Allowance. The allowance can be claimed via the HMRC website;
• Capital Gains Tax (CGT) – if you plan to sell a residential property after 6 April 2020 you may have to report that gain and pay any CGT within 30 days of completion. This will not affect people planning to sell their main residence but a buy-to-let property or second home would be within the scope of the new rules if a gain was involved.
  
  Lettings relief often involved in the calculation of CGT sale of properties, which have been both lived in as a main residence and also let during their period of ownership, is now only available if you were in shared occupancy with a tenant.

Beyond these generic points, personal tax planning is most effective when it is carried out for an individual with full consideration of their personal and financial circumstances.