How prepared are you for tax year-end? With just over two weeks to go until the 2023/24 tax year draws to a close, the clock is ticking to use any remaining allowances before they refresh on 6th April!
This Tax Tuesday, we thought it was time to look at some of the key tax-advantaged allowances to consider making the most of over the next few days.
1. Making sure you keep your Personal Allowance
Did you know that the income limit for receiving the £12,570 tax-free Personal Allowance is £100,000? If you earn just over this limit, you may want to consider some strategies to reduce your taxable income, bringing it down to £100,000.
Dividend allowance
If you’re a company shareholder, then you can take dividends out of the company’s profits as well as, or instead of, a salary. Each year you’re entitled to a set allowance before you’re required to pay tax on dividends. For 2023/24 the allowance has been £1,000 – for 2024/25 this will decrease to £500.
Any dividends exceeding the allowance are subject to the following tax rates, dependent on your income tax band:
- Basic rate: 8.75%
- Higher rate: 33.75%
- Additional rate: 39.35%
Annual pension allowance
Each year, all pension contributions that you make up to £60,000 are subject to tax relief. While pension contributions made directly from your wage are taken before tax is deducted, any payments made directly into your pension will receive relief claimed by the provider at the basic 20% rate. To make sure that you receive the correct relief in-line with your Income Tax band, you will need to claim the rest on your Self Assessment tax return.
Charitable gifting
If you are looking to reduce your taxable income, you may also want to consider increasing your charitable donations. Did you know that these are tax free? Depending on how you donate, you may need to claim part of the tax back via Self Assessment.
2. Using savings allowances
ISA allowances
On 6th April your ISA allowances will refresh, meaning that any unused allowance will be lost. For 2023/24 you’re entitled to save £20,000 tax-free across the various ISA schemes. You’re not required to pay tax on any interest on cash in an ISA, or any income or capital gains from investments in an ISA.
3. Gifting or selling your assets tax-free
Inheritance Tax (IHT) Gifting allowance
When it comes to giving your money or possessions away, you can only give a certain amount before they will be added to the total value of your estate (incurring IHT)– this is known as the tax-free gifting allowance. You may want to use the £3,000 allowance before year-end, if there are a couple of high value gifts that you’re planning to give in the coming months.
CGT annual allowance
Are you considering selling an asset that may have increased in value since you bought it? If you haven’t already used your 2023/24 Capital Gains annual allowance, then you may want to do so now, before it decreases in 2024/25. For this tax year, the annual exemption allowance is £6,000 whereas for the coming year it will be £3,000. After 5th April 2024, any remaining allowance will be lost.
How can we help?
For advice on these ideas and many more, please contact your relationship principal, email tax@haroldsharp.co.uk or call 0161 905 1616 for more information.
The author takes every care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss occasioned to any person acting or refraining from acting as a result of this material or from making use of this material can be accepted by the author.