Tax planning should be a priority no matter what time of year it is, but with the end of the current tax year quickly approaching, you should pay special attention. You have until 5 April 2023 to ensure you have utilised all the tax reliefs and annual allowances available to you and have minimised all potential liabilities before the deadline. It’s also a great time to look ahead at the next tax year and your long-term future so you can put into place any planning opportunities.
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.
Here are a few things to consider so you’re ready for the end of the tax year and beyond.
Individual Savings Accounts (ISAs)
The importance of maximising your ISA allowance each year can not be overstated. Anything that you save into your savings or investment accounts is done so tax-efficiently, meaning you won’t pay income tax, tax on dividends, or Capital Gains Tax on any proceeds. The ISA allowance for 2022/23 is set at £20,000 and you can spread your money across all the ISA types available to you.
Pensions Annual Allowance
Your annual allowance for pension contributions is £40,000 per tax year unless you are an additional rate taxpayer or have already accessed your pension benefits. If you are at risk of being subject to tapering, maximising your pension allowance and effectively reducing your adjusted income is a smart way to reduce your tax liability.
Capital Gains Tax (CGT)
Your CGT allowance for the 2022/23 tax year is £12,300 but will be reduced to £6,000 from 6 April 2023 and reduced even further to £3,000 from 6 April 2024, so it’s crucial you plan your asset sales carefully. Don’t forget that if you’re married or in a civil partnership your allowances are transferable to your partner and vice versa, and that jointly owned asset sales allows you to essentially make double the amount before any CGT is due.
Inheritance Tax (IHT) Relief
For any estate valued above £325,000, or up to £1 million for married couples (including the residence nil-rate band), Inheritance Tax must be paid. You may already know that the IHT thresholds have been frozen until April 2028, but did you also know that in private companies, certain business assets, including some shares and farmland, can qualify for 100% relief? Confirm if your business is eligible to take advantage.
Residence nil-rate band (RNRB)
This relatively new allowance was introduced during the 2017/18 tax year and is available when one passes down a main residence to a direct descendant after their death. Currently, the allowance is £175,000 but when it is combined with the nil-rate band of £325,000, a total IHT exemption of £500,000 per person, or £1 million per married couple can be achieved.
Are you ready for the end of the tax year?
All these suggestions are really just an overview and there is so much more that goes into ensuring you’re ready for the end of the tax year. To ensure you’ve exhausted all options for allowances and relief available to you, work with a financial adviser. We’ll not only review your current tax plan but we’ll help you align it with your overall financial goals. To get started on your end of year tax planning, get in contact with us today.