At this time of year, we all think about New Year’s resolutions.
It is also a good time to start thinking about tax planning opportunities before 5 April 2024.
Please think about
1. Equalling income between you and your spouse/civil partner to make best use of your tax allowances and lower rate income tax bands.
2. Using your £20,000 ISA allowance for 2023/24 – with frozen Personal Allowances and frozen tax rate bands; the dividend allowance reduces to £500 on 6 April 2024, so we’ll all be paying more income tax on our interest and dividend income.
With the help of a financial adviser you could consider generating tax-free dividend income by investing in Venture Capital Trusts.
3. Your capital losses!
Do you have a note of how many you have realised previously? You could initiate a tax-free inter-spouse transfer of an asset which you are intending to sell (or gift) to your spouse/civil to utilise their capital losses.
4. Using your 2023/24 £6,000 CGT annual exemption, if you’ve not used it already. It reduces to £3,000 on 6 April 2024.
5. Increasing your pension savings before 5 April 2024 to utilise your unused annual allowance from 2020/21 before it evaporates on 5 April 2024. Bear in mind that if your total income exceeds £100k, tax relief will be secured at 60% on additional pension contributions (and income over £125,140; at 45%). Better still, if you can make additional pension contributions via salary sacrifice arrangements in conjunction with your employer, National Insurance savings can be achieved too.
6. Making pension contributions for others? Every tax year you are able to make contributions under stakeholder arrangements for the benefit of non-earning relatives of up to £2,880 to which the government will add £720.
7. With the help of a financial adviser, subscribing for shares in a qualifying Enterprise Investment Scheme company to attract 30% income tax relief and, possibly defer CGT paid previously.
The above list is non-exhaustive and everyone’s situation is unique! If you have made financial decisions over Christmas and resolutions for 2024 with tax savings in mind, please do call us on 01223 810100 to discuss your thoughts.