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Tax Year End Considerations

As another tax year draws to a close, this can prompt a review of some key financial housekeeping to be considered.

Below are some key points to consider when planning for the end of Tax Year 2023/2024: 

Maximise your pension contributions

Contributions to your personal pension plan can provide income tax relief. The maximum contribution that can be made for 2023/2024 without incurring an income tax charge increased to £60,000.

 Additional contributions may be possible if you have not used your allowances for the previous three tax years. Contributions must be made before 5 April 2024 if tax relief is to be claimed in 2023/2024.

High earners continue to be impacted by the reduced annual allowance for those earning over £260,000, and the minimum pension amount for those high earners is being reduced to £10,000 depending on your earnings. More details on Annual Allowance can be found in our factsheet here.

If you earn over £100,000 your personal allowance will start to reduce. For every £2 you earn over £100,000, your allowance of £12,750 is cut by £1. Therefore, a salary of £125,140 per year will mean you pay income tax on all your income. If you contribute to your pension, you can reduce your income on paper, helping you retain your personal allowance.

Consider a pension for non-earning spouses, partners, or children. In the 2023/24 tax year, you can contribute £2,880 net into a pension attracting tax relief, meaning your £2,880 will be topped up to £3,600 by the government.

The abolition of the Lifetime Allowance could have an impact on pension planning with more details to come in the new tax year.

This is a specialised area and advice would need to be obtained specific to individual circumstances. Professional advice is always recommended.

Maximise your ISA allowance

ISAs provide a tax-efficient environment for your savings as they remain free from UK income tax and Capital Gains Tax (CGT). If you’re over 18, the maximum investment that may be made during the 2023/24 tax year is £20,000.

The Junior ISA allowance for under 18s has a maximum allowance for this tax year of £9,000. 16 and 17 year olds are currently able to invest up to £20,000 in an adult Cash ISA on top of the £9,000 Junior ISA allowance. This ISA “loophole” is due to close in the new tax year.

Make the most of these allowances as any unused ISA allowance cannot be rolled forward into the next tax year.

Venture Capital Trusts

Investing in qualifying Venture Capital Trusts (VCT) will attract 30% income tax relief (maximum investment of £200,000) providing the investment is held for five years. Dividends are tax-free, and no Capital Gains Tax is paid on disposal. Advice is always recommended.

Capital Gains Tax

Capital gains of up to £6,000 per person will not give rise to a capital gains tax liability for the 2023/24 tax year and any unused balance cannot be carried forward. From 6th April 2024, Capital Gains Allowance is set to reduce from £6,000 to £3,000 per annum.

Dividend Allowance

If you have invested assets, you could also benefit from a dividend allowance. This is currently £1,000 per year and can be paid tax-free. Anything above this is taxable at dividend rates, From the 6th of April 2024 this allowance will also be reduced to £500 per annum.

Inheritance Tax

If you are considering making gifts to family and friends soon, ensure that you have maximised your annual inheritance tax gift exemptions for this tax year. You may also utilise any unused part of the previous tax years exemption, but this will be lost if not used by 5 April 2024.  The annual gift exemption is £3,000 and small gifts exemption is £250.

Any changes to Inheritance Tax will be issued after the Spring Budget on 6th March.

Get professional advice.

This content is an overview of some of key points that may help reduce your tax liability, but as everyone’s circumstances are different, we always recommend that professional advice with your financial planner in the first instance to fully understand the most beneficial options for your own situation. Get in touch with our team today.