Year end tax planning tips for you and your practice

Tax planning season has arrived, and law firms have a lot to think about before the end of the financial year. MHA’s head of professional services, Karen Hain, presents a guide to tax planning for 2022.

As we approach the end of the tax year, now is the time to review your tax affairs to ensure that you have taken advantage of all reliefs available, and have considered some planning opportunities to help reduce your tax liabilities.

The MHA national tax team has worked together to create our annual Year End Tax Planning Guide, which provides key tax and financial planning tips that must be actioned prior to 5 April 2022. Some of the themes include:

Corporation tax: New measures

In the March 2021 Budget, the Chancellor announced measures to encourage investment and help struggling businesses. In our guide we look at some of the measures announced, including The Super Deduction, accelerated relief for Special Rate Asset expenditure, extended loss carry back relief and the Annual Investment Allowance. To benefit from these changes, legal firms need to think carefully about when they spend money on capital assets and what they spend it on.

Inheritance tax: Food for thought

There are a number of reliefs and exemptions for inheritance tax, and some are worthy of annual consideration, while there is a lot to be considered when it comes to longer term inheritance tax planning as well.

The Health & Social Care Levy: How will it affect your practice?

On 7 September 2021, the government announced the introduction of a new tax called The Health and Social Care Levy to support the UK health and social care bodies, following the impact of the Coronavirus pandemic. This will likely have implications for both employee and employer national insurance contributions.

Capital gains tax: Use your annual exemption – or lose it!

The annual exemption for 2021/22 is £12,300, and will remain at that level up to and including the 2025/26 tax year. This is a ‘use it or lose it’ exemption – it cannot be carried forward to future years. It therefore makes sense to crystalise gains each year to the extent of the annual allowance.

Pensions: Structure your assets to make the best use of reliefs and allowances

If the total of all your pension funds is likely to be at or near £1m by the time you retire, you should seek urgent advice. A look at current pension rules could reveal some options to consider.