The end of the tax year is upon us once again and planning is an important element of both an individual and a business’s tax strategy to ensure that all tax reliefs and allowances available have been utilised in the current tax year. This presents an ideal opportunity to take a wider review of your circumstances and plan for the year ahead.
So what can you do?
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ISAs
ISAs are simple and putting your savings or investments into an ISA keeps your money free from tax. This is a ‘use it or lose it’ allowance, so make sure to act before the tax year ends.
In 2023/24 you can invest £20,000 using your ISA allowance.
For couples, the allowance means a max of £40,000 could be sheltered within an ISA (or ISAs) in one tax year. For children, you may also consider the junior ISA with an allowance of £9,000 this tax year.
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Capital Gains
The Capital gains tax allowance is £6,000 for 2023-24 tax year, but from this coming April this will be dramatically cut to £3,000.
To make the most of this allowance you can switch between similar investments such as switching from a general investment account to an ISA, Junior ISA or a Pension.
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Pension Contributions
Pensions offer a tax-efficient way to invest for the long-term. With tax-relief on contributions, tax-efficient growth within the pot and when accessing the pension, 25% of the fund is completely tax-free!
You can receive tax-relief on contributions of up to 100% of your relevant earnings (for example your salary and bonus) up to £60,000, but you can only receive tax-relief on earnings in the current tax year. Higher earners could even help mitigate the impact of losing their personal allowance or child benefit payments with a pension contribution. Employees may also consider taking a bonus as a pension contribution, should their employer be happy to do so, and business owners could consider taking profits as a pension contribution.Â
Inheritance Tax
Depending upon factors such as your age and the value of your estate, you may want to reduce your potential inheritance tax (IHT) bill. There are several IHT allowances that are time and tax year sensitive. Using these allowances might mean you can mitigate the IHT charge of 40% on estates over £325,000, although the residence nil rate band is now helping many to remain outside of IHT issues, so please check your potential liability first.
To begin with, there is the £3,000 gift exemption, you can reduce your taxable estate here without any complications and you can also carry forward any unused gift allowance from the previous tax year.
There is also the £250 small gifts exemption. You can make as many gifts of up to £250 per person, per tax year as you wish free of IHT. This is, however, providing the recipient is not also part of your £3,000 annual exempt amount.
There is also the gifting under ‘normal expenditure’ exemption. If you start up regular gifts of any amount, this is usually exempt from any IHT concerns, providing this does not impact your own standard of living.
Keeping a record of any gifts will help make things a lot easier for the executors of your estate. IHT planning can potentially save significant amounts of tax, so it is always worth having a professional review of your own circumstances if you have any concerns.
Here at Maskell Moss, we can help you navigate the complex world of financial planning and if you believe you may benefit for anything we mentioned above, or indeed anything else, please get in touch!