PLAN NOW TO MINIMISE YOUR 2021 & 2022 TAX BILLS
By Dave Hickey
It’s Race Week in Galway and, as ever, I was told yesterday: “We won’t feel it now until Christmas”.
While it’s still only July, there is something to be said to looking ahead to the end of 2022 to see what can be done to help minimise personal and business taxes as well as reducing costs for 2023.
Personal & Corporate Tax
There are a plethora of tax deadlines in the last quarter of the year and being aware of them and the opportunities they present can help you reduce your tax burden for 2021 and/or 2022.
You may be aware of some of these milestones and others may be better known to your accountant. Either way you should be aware of the implications of missing a deadline and how it could impact your business or your personal finances.
- 23 September – Corporation Tax returns for year end 31 December 2021. If you are company director, remember that a CT1 must be filed for accounting periods ended in 2021. Check with your accountant that this is done.
- 31 October – Personal Tax returns for 2021. If you are using Revenue’s Online Service (ROS), this can be extended to 16 November.
- 31 October – Pension Contributions for 2021. You can reduce your 2021 personal tax by making contributions to your pension scheme in respect of that year up to 31 October, slightly later if you’re a ROS user.
- 15 December – Capital Gains Tax (CGT) payments for 2022. You must pay CGT due on any taxable gains made between 1 January and 30 November this year. This is a fairly tight deadline for gains made late in the period! For taxable gains made in December 2022, the deadline is 31 Jan 2023.
- 31 December – Capital Acquisitions Tax annual exemption. You are allowed to make a tax-free gift of €3,000 per person each year. While it doesn’t save you tax, it means the recipient doesn’t have to worry about it either, meaning, for example, your family can benefit.
- 31 December – Tax Warehousing. From 1 January 2023 Revenue will start to charge interest of 3% on any unsettled balances for taxpayers who engage with it before this year end to agree a repayment scheme.
Cash Flow and Borrowings
Interest rates are likely to continue to rise this year and throughout 2023, making overdrafts and variable rate loans more expensive for borrowers.
It’s worth spending time assessing your current financial position and forecasting for the rest of 2022 so that you can make some calls now which could benefit you this year and into the future. For example:
- Repay Loans If your cash flow allows it, repay whatever loans you can to reduce your interest costs.
- Convert Overdrafts to Loans Overdraft interest is one of the highest rates you can pay and is almost always variable. Look to negotiate a fixed-term loan to replace this, reducing your costs and giving you more certainty.
- Purchase Fixed Assets If you have the resources and were planning capital expenditure in 2023, it may be beneficial to bring this forward to this year.
- If you’re forecasting taxable profits in 2022, you may benefit from additional capital allowances in the year reducing the tax impact this year.
- If you need to borrow to fund the expenditure you may be able to lock in at lower fixed rates now compared to 2023 when rates will continue to increase.
Get professional advice
All of these steps should be second nature to your in-house finance team or your professional adviser. However, it’s always worth having a conversation with them at this time of year as they may not be aware of plans you have which could have a positive impact on your tax and other costs for 2022.
Don’t be a gambler! Reduce the odds by getting professional advice!