New Tax Year Checklist – 2023/24
With the new tax year upon us in some of the most uncertain financial times in the recent history of this country, you’d be forgiven for thinking that your money won’t be able to go as far as it did last year. Despite the looming threat of recession and sky-high interest rates, there’s actually a number of ways that you can not only protect your money, but perhaps even make go it a little further than you initially thought. This is our Morrinson Wealth New Tax Year Checklist.
Pension Contributions
With the announcement of a rise in the pension cap in the spring budget, there are plenty of ways to make the most out of your pension in the 2023/24 tax year.
If you are looking to maximise pension savings, you should consider fully utilising your annual allowance, which has increased this year to ￡60k per annum – up ￡20k from the previous ￡40k annual allowance. You can carry unused allowances from the three previous tax years, so it is worth checking right back to 2019/20 if your 2022/23 allowance is fully utilised.
In a similar vein, if you’re making a large pension withdrawal this year, consider the option of?spreading this out over a couple of years. Pension withdrawals are liable to income tax, so spreading them over a period of time will decrease your tax liability.
There are many steps you can take to bring down your taxable income, by means of donations and contributions. These are uncomplicated and, in many circumstances, may even benefit in the long run to do so. Of course, we all want to have our cake and eat it, but a bit of savvy tax planning might put you in an even better position than you imagined:
Making full use of your ISA’s
As mentioned above, there are ways to bring yourself into lower tax bands and preserve your child benefits via pensions – but did you also know you can do exactly the same with ISA’s? Not only is paying into the designated ISA limit is tax free, but any interest, capital growth or dividend income on assets held in an ISA are also free from the tax man.
With a personal allowance of ￡20,000 and a junior ISA allowance of ￡9,000, there are plenty of tax beneficial options available to you this new tax year. Take full advantage of the ￡20,000 tax deductible ISA allowance and, if you’re married, ensure your spouse does the same. The same principle goes for junior ISA’s (if you have a child), with an allowance of ￡9,000 giving you some extra wiggle room, should you hit the ￡20,000 limit for your own ISA.
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If you do make contributions to your child’s ISA, this money will now belong to the child and cannot be withdrawn until they reach adulthood. With this in mind, you should only contribute money that you can afford to and not money that you might miss later on down the line.?
Inheritance Tax and Capital Gains Tax
Use your Inheritance Tax (IHT) gifting exemption of ￡3,000 for this year. This essentially means you can give up to ￡3,000 to your loved ones completely tax free. Whether this be a birthday or Christmas gift, this will allow some relief from your loved ones when you eventually pass away, reducing the amount of Inheritance Tax they might owe.
Take advantage of your annual Capital Gains Tax (CGT) exemption by realising gains of ￡6,000, (￡3,000 for trusts) in this tax year. A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset, typically realized from the sale of stocks, bonds, precious metals, real estate, and property. Those with larger liabilities might look to take gains over two tax years and make use of tax-free inter-spouse transfers. For example, if you have stocks worth ￡6,000, making two ￡3,000 withdrawals over two years will give you extra room to play with your CGT exemption.
Options open to business owners
As a business owner, you have the opportunity to be flexible with your pre-tax profits by diverting them into a personal pension. This will allow some relief on Corporation Tax, income tax (including dividends) and NIC’s. Needless to say, these contributions will have to be made before the end of the financial year to qualify – the 31st?March 2024, in most cases.
Dependent on your salary, consider paying yourself a dividend if you are the owner of your business. You can pay yourself a lower salary, brining you to a lower tax rate, and then claim dividends to make up the difference. By doing this, you can avoid paying as much on your National Insurance contributions as you usually do, as the first ￡2000 of a dividend in tax free. Obviously, this will vary from business to business, but the principle remains the same.
Get in touch
A New Tax Year can bring new opportunities for a brighter future, even with all of the financial uncertainty in the world. In fact, now is as important a time as ever to ensure you’re handling your money in the best way you can and protecting your future. At Morrinson Wealth, we have a number of financial advisers trained to explain every single point in this article in greater detail and tailor to your business or personal needs. Get in touch for a chat today and see just how you can make the most of the 2023/24 tax year.