Client Newsletter

Time to get your tax affairs in order before April

Making sure your personal tax affairs are in good order means taking an in depth look at the allowances and vehicles that allow you to manage your money in the most efficient way.

It also means taking stock of what you have and what you want to do. Here we look at some of the ways you can get your personal tax in the best shape it can be.

Savings and dividend allowances

A number of allowances are available for individuals and families to make use of in relation to their savings and investments.

There are as follows:

Taxpayer Savings Allowance Dividend Allowance
     
Basic rate £1,000 £2,000
Higher rate £500 £2,000
Additional rate £0 £2,000

Dividend Tax allowance will fall from April 2023 to £1,000, followed by a further reduction to just £500 in April 2024.

Gift Aid payments

If you give to a charity, make sure you tick the Gift Aid Box if you are a UK taxpayer. This means the charity will be able to claim back basic relief on the payment from HMRC and higher-rate taxpayers can claim additional tax relief.

Individual Savings Accounts (ISAs)

You can put up to £20,000 into an ISA each year if you are a UK taxpayer. This includes cash and stocks and shares ISAs.

A Lifetime ISA (LISA) is available for those aged between 18 and 40, which could be used to support your retirement or help with the purchase of your first home.

You can put in up to £4,000 each year until you’re 50, but must make your first payment into your ISA before you’re 40.

The Government will add a 25 per cent bonus to your savings, up to a maximum of £1,000 per year. Contributions made to a LISA count towards your total ISA limit for the year.

There are also options of Junior ISAs for those aged under 18.

Trading and property allowances

Each allowance is £1,000 tax-free and can be claimed instead of the actual expenses incurred. You can also receive up to £7,500 tax free per year via Rent-a-room relief if part of your home is let out.

Marriage allowance

All married couples in the UK are entitled to the Marriage Allowance if they qualify.

The allowance allows you to transfer £1,260 of your Personal Allowance to your husband, wife or civil partner, providing they earn more than you and are within the basic rate tax band.

To benefit, the partner transferring their allowance must normally have an income below the Personal Allowance – currently £12,570.

This can result in annual tax savings of up to £252 a year.

Reliefs available through employment

If you are an employee there are several reliefs that can be claimed related to your job.

These include:

  • Professional subscriptions
  • Working from home allowance
  • Business miles travelled in your own vehicle.

Each of these reliefs are subject to very specific criteria, so it is best to seek advice before claiming them.

Capital Gains Tax Annual Exemption

You can make use of the annual Capital Gains Tax exemption of £12,300 before 6 April 2023.

Be aware that this exemption is being reduce to £6,000 in the new tax year, before falling again to £3,000 in the following year, so make use of it while you can.

Inheritance Tax (IHT) reliefs

It is possible for parents and grandparents to make tax efficient gifts via an opportunity to gift up to £3,000 each annually.

You can also make small gifts of £250 per person per tax year. This means you can give £250 to each child or grandchild each and every tax year without it being classed as part of your estate if you die within seven years of the gift.

Larger gifts can also be made, but you need to consider the seven-year rule when doing so.

Pension Contributions

You can make contributions to your pension each year, which attract basic tax relief from the Government, subject to various income-based limits.

Pensions are a complicated issue, but it well worth exploring your options when it comes to making contributions.

Need help?

If you require assistance with personal tax planning before tax year-end, speak to our team today.