While personal tax planning should always be top of mind, since the tax year has just begun, it’s a perfect time to ensure you set yourself up for success for the year ahead. With the new year comes new tax rules and regulations to be aware of, and since everyone would like to keep more of their hard-earned money, it’s always a good idea to stay on top of new information.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Reviewing your tax plan at the start of the year means you have twelve months to take advantage of all the available remaining reliefs, allowances, and exemptions.
It’s also a good time to review your long-term future goals to see if your strategy will help you reach them.
Here are a few things to consider while undergoing tax planning this year.
Exciting pensions news
In the recent Budget Statement, Chancellor Jeremy Hunt announced a few changes coming down the pipeline, namely that this year would be the last that the lifetime allowance was in effect and would be abolished from next year. Annual allowance limit is increasing from £40,000 to £60,000. Adjusted income that is used to establish when tapering begins on high earners’ allowances, is increasing from £240,000 to £260,000 and the minimum annual allowance someone who is subject to tapering can retain is increasing from £4,000 to £10,000. Also of note, the money purchase annual allowance is increasing from £4,000 to £10,000.
There is no change, however, to the maximum amount you are allowed to withdraw from your pension tax free, remaining at £268,275 – 25% of the lifetime allowance in 2022/23. Any income drawn from pensions that exceeds this, will not be subject to additional taxes, but it will still be charged according to the income tax rate.
Tried and true
While you’ll want to take advantage of these new pensions rules in order to save on tax, there are still some tried and true methods to include in your tax plan:
- If you are married, make sure you are fully utilising each person’s personal reliefs and both starting and basic rate tax bands.
- Individual Savings Accounts (ISAs): ISAs are a great way to save and invest tax-efficiently into a cash savings or investment account. The proceeds are not subject to Income Tax, tax on dividends, or Capital Gains Tax. Make sure you maximise your ISA allowance which is £20,000 for this tax year.
- Other tried and true items to ensure you’ve got covered are Capital Gains Tax (CGT), Inheritance Tax (IHT), and Residence nil-rate band (RNRB).
Ready to tackle the tax year?
These suggestions are really just an overview because even if you feel like you have a simple financial situation, there is still so much you need to consider when it comes to taxes. But since we’re at the beginning of the tax year, there is so much time to execute on all of your plans.
To ensure you’ve incorporated all options for allowances and relief available to you, the best thing to do is to work with a financial adviser. We’ll help you review your current tax plan and ensure it aligns with your overall financial goals. To get started on your new year tax planning, contact us today.
