Every year, thousands of people miss out on valuable tax allowances simply because they leave their tax planning too late. So, when should you do your tax planning and why is early planning so beneficial for your finances? We look at the problem of leaving it too late and the ideal times of the year to carry out a review.
The problem with late tax planning
With the Autumn Budget fast approaching, there’s always speculation around this time of year about what might change or stay the same. Many people only think about tax at year’s end when they come to submit a return or after the deadline has passed. However, waiting too long to act could cost you or your business some valuable tax opportunities.
By taking a proactive approach to your tax planning, you can review your finances before the end of the tax year. This will enable you to make more informed decisions, and you can take advantage of any available tax relief before the year ends.
Did you know that according to HMRC, one in four people file last-minute tax returns? In 2024, 778,068 submitted their self-assessment tax returns on the last day, 31 January, and 1.1 million missed the deadline. As a result, HMRC earned £110 million from £100 penalties. So, don’t lose out and give the taxman extra cash – instead, save money by planning ahead.
Don’t wait for year-end tax planning
Timing is everything when it comes to tax planning. By waiting until year end to look at your tax strategy, you could miss out on useful forms of relief and allowances. And if you wait too long, you’re also at greater risk of making rushed decisions and inefficient withdrawals.
Common examples include not taking advantage of unused ISA or pension contributions and not utilising capital gains tax (CGT) or gifting allowances. For business owners, leaving profit extraction or pension contributions too late can result in a higher tax burden.
When and how to do effective tax planning
When it comes to timing, it’s worth being aware of certain “sweet spots” for financial planning. An ideal time to review your finances and check your tax planning is between November to March before the end of the financial year.
Below is a sensible approach to your year-end tax planning:
- Review your income and allowances so you can check and refine your existing tax strategy.
- Use ISA, pension, capital gains tax (CGT) and gifting, so you can make the most of all available forms of tax relief.
- Adjust your investments or contributions ahead of any Budget changes so you are prepared in advance and can optimise your money.
If you’re a business owner, then it’s also important to check your profit extraction and company pension strategies. Our team offer financial planning advice for businesses and can advise you on the key areas of focus. You’ll benefit from our calm, expert reassurance, and we offer a fixed-fee, goals-based approach to ensure every action fits your bigger plan.
Chartered Financial Planner, Nottingham
Failing to act before the tax year ends could mean losing valuable opportunities to reduce your tax burden and to optimise your investment strategy. By making smart financial moves before the year ends, you will be set up for the year ahead. If you want to check if your current financial plan and your money are being managed efficiently, book your year-end review before the end of the year.
At Balance: Wealth Planning, we offer expert guidance and goals-based, fixed-fee financial planning. Our financial planners will check all available forms of tax relief and opportunities. We’ll ensure you’re fully prepared for the year ahead and your money is working as efficiently as possible.
Make the most of your tax allowances – get in touch with our Chartered Financial Planners.
Sources:
https://www.crowe.com/uk/insights/tax-planning-individuals
https://www.charnwoodaccountants.co.uk/what-is-tax-planning/
https://rjp.co.uk/1-in-4-people-file-last-minute-tax-returns/
