Have you completed your tax year end planning? - 5th February 2024

Now that the 31st January tax return and tax due deadline has passed, it’s time to check you’ve completed tax planning actions in good time before 5th April – the tax year end.

With the further freezing of income tax thresholds, meaning that more people will be paying the higher rates of income tax, it’s more important than ever to check that allowances are being maximised.

Pension contributions – The thresholds changed again! You can pay between £3,600 gross and £60,000 gross overall into your pension schemes each tax year, potentially more with carry forward allowance. To avoid being caught out and accidently overpaying, it is usually worthwhile seeking advice.

Higher rate or additional rate taxpayer? Don’t forget to claim the tax relief on pension contributions if these are not made by salary sacrifice.

Dividend allowance – The tax-free dividend allowance is reducing from £1,000 to £500 so more of your dividend income will be taxed. Investments with tax free income and gains, such as ISAs, are even more important now.

ISA allowance – The annual ISA investment allowance is still £20,000 per adult per tax year and now there is more flexibility about paying into different ISAs. Juniors can have £9,000 put away for them each tax year.  Those aged and 18 or over and under 40 can open a Lifetime ISA and contribute £4,000 of their £20,000 allowance into a Lifetime ISA up to age 50.  If you want to know the rules, benefits, and downsides, you can contact us.

Capital gains tax allowance – this has been reducing and is halving again from £6,000 to £3,000 for individuals for 2024/25 so from 6th April. This means that more of gains will become taxable. Currently, capital gains tax rates are lower than income tax rates, once earnings are over the tax-free personal income tax allowance.

Married and maximising allowances – a married couple has two sets of allowances which can be used. Two ISA’s, capital gains exemptions, personal savings and dividend allowances available.

VCT’s and EIS’ – investing into Venture Capital Trusts and Enterprise Investment Schemes provides funding for new and smaller UK businesses, which are higher risk and therefore favourable tax incentives are offered. You can speak to us to find out more.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Approved by The Openwork Partnership 31/01/2024