Whether you live in the UK or Australia, the end of the tax year can throw up both challenges and opportunities when it comes to your financial planning.
To help you manage your finances at this important time of the year, here are a series of tips to help you with your end of tax year planning, covering issues such as allowances and tax incentives.
Key dates to note
In the UK, the tax year ends on 5 April. The equivalent date in Australia is 30 June.
If you are obliged to complete a tax return by either HMRC in the UK or the ATO in Australia, the deadlines are the following 31 January (UK) and 31 October (Australia). However, in Australia, if you are using a tax agent to file your annual return, the deadline is extended – in certain circumstances it can be as late as the following May.
Soon after the end of the tax year in both countries, you will receive a formal statement of earnings from the relevant tax office.
The importance of the annual Budget statement
In both the UK and Australia, the end of the tax year and start of a new one is preceded by an official government Budget statement. In Australia this is made by the federal treasurer, and in the UK by the chancellor of the exchequer.
Both statements are usually highly publicised, set-piece political events, in which the government’s financial policies and priorities are set out.
Most importantly, from a personal financial planning point of view, the statements will confirm tax rates and allowances for the forthcoming financial year.
In the UK, the Budget statement is usually held in early March, a few weeks before the end of the financial year. In Australia, Budget day is always the second Tuesday in May – six weeks before the end of the tax year on 30 June.
In both countries, you often get emergency budgets or financial statements – particularly in times of economic upheaval such as the Covid pandemic. But the key Budget statement is when main announcements are made.
End of tax year financial planning – five general tips
Here are five tips to help you with your end of financial year planning, regardless of whether you live in the UK or Australia:
- Before the end of the tax year, try to maximise use of allowances and tax incentives. It often is a case of “use them or lose them”.
- Make sure you’re organised, keeping paperwork and financial records up to date. It’s much easier to make full use of allowances if you know your financial position.
- Remember to consider both yours and your partner or spouse’s finances. Even if you have used up all your allowances for a particular tax year, you could still look to maximise the same allowance for your partner.
- Try and plan ahead. It’s tempting to leave things to the last minute, but there’s always the danger that you forget, or can’t get the paperwork together in time.
- Work with financial professionals, particularly if your financial affairs are complicated. Accountants, tax advisers, and financial planners can all offer you valuable support and guidance to help you avoid paying too much tax and missing out on advantageous opportunities.
Five tips for end of tax year in Australia
Here are five end of tax year financial tips for clients in Australia:
- You could reduce your assessable income by making a personal super contribution. This will usually be taxed in the fund at the concessional rate applicable to super funds of up to 15%, instead of your marginal tax rate, which could be up to 47%.
- If you have any unused concessional super allowance from previous years, consider carrying this forward to the current tax year.
- If you’re an eligible first home buyer, you could be eligible to make a voluntary super contribution that can be used as a future deposit for house purchase.
- Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is acquired and is first used or installed ready for use.
- Consider prepaying deductible expenses to bring forward the tax deduction into the current tax year to reduce your assessable income.
Five tips for end of tax year in the UK
Here are five end of tax year tips for clients in the UK:
- Make sure you’ve maximised your annual pension entitlement. Tax relief makes pension contributions very tax-efficient. You can pay a maximum of £40,000 or your annual salary – whichever is lower – and benefit from tax relief. However, remember that your employer contributions count towards your maximum.
- Make use of your Capital Gains Tax (CGT) exempt allowance. You’ll pay CGT on the sale of many assets on all gains above the allowance – currently £12,300 in 2021/22 tax year.
- If you know you’re due a tax rebate, start getting the information for your next tax return together so you can complete it at the start of the new financial year.
- Everyone has an annual ISA savings allowance of £20,000 (2021/22 tax year). This runs out at the end of the tax year so try to maximise this valuable tax saving.
- Ensure you’ve maximised your annual gift allowances to reduce the value of your estate that will be subject to Inheritance Tax in the event of your death.
Get in touch
bdhSterling are authorised to provide financial advice in both the UK and Australia. This means that we’re uniquely placed to support you with your financial planning. Our tax specialists, bdhTax, also have a wealth of experience in helping clients manage their tax affairs.
Get in touch if you believe you would benefit from advice.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.