The 2023-24 Tax Year ends on 5th April 2024. Now is the perfect time for individuals to start preparing for their Tax Returns including thinking about Tax planning. The actions you take over the next couple of months can massively help you maximise your income Tax savings. At Ultra Tax Ltd, our experienced team of accountants are here to give you advice and guidance throughout the year.
In England and Northern Ireland tax thresholds and the personal allowance are frozen until 2026 whereas in Scotland this year sees the introduction of a new tax band making this the ideal opportunity to obtain advice on maximising all potential tax savings.
Dividends
Using your dividend allowance which is £1000 for 2023/24 reducing to £500 in 2024/25 reduces your tax-free income.
In the UK, individuals pay tax on dividends above the dividend allowance. The tax rates are:
8.75% for basic rate taxpayers
33.75% for higher rate
39.35% for additional rate
The dividend tax rate is lower than income tax rates. This is one of the reasons dividends are tax-efficient income.
Capital Gains Tax (CGT)
Now is the perfect opportunity to speak to our accountants at Ultra Tax Ltd if you’re considering selling any assets. The annual CGT tax exemption for 2023/24 is £6000 however is reducing to £3000 for 2024/25. CGT can be complicated due to various reliefs and exemptions so if selling assets is something you’re looking into get in touch for some professional and friendly advice.
Inheritance Tax (IHT)
One thing to consider is that IHT can be payable up to seven years before death, we are aware that this isn’t something people like to think about due to potential stress and confusion making this another ideal to get in touch with us at Ultra Tax Ltd. You’re able to make tax-free gifts throughout your lifetime but please ensure you seek professional advice. Below are some ideas of how to reduce your exposure to IHT.
Gifts between spouses/civil partners are exempt from IHT. They must live in the UK permanently and be legally married or in a civil partnership.
Gifts to charities and political parties are also exempt.
You can also annually give away £3,000 worth of gifts each year as part of your annual exemption. These annual gifts can be to one person or several people.
You can gift up to £250 per person each tax year provided you have not used another allowance on the same person.
Gifts for birthdays, Christmas and weddings are not subject to IHT. Limits apply to marriage gifts based on your relationship with the recipient.
You can make regular payments from regular income, known as 'normal expenditure out of income'. This may be paying rent for a child or giving financial support regularly.
Personal Savings Allowance
Contact us to advise you on maximising your tax-free savings income. The personal allowance is £1000 for a basic taxpayer and £500 and if you’re a higher taxpayer.
Savings and ISAs (Individual Savings Account)
Our team of accountants can advise you how to maximise tax-free savings held in your ISAs. For the tax year 2023/24 the ISA allowance is £20,000, this includes all types of ISAs (Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs). Another thing to consider is the Junior ISA. A Junior ISA or JISA is a tax-free savings account for children. You can use a JISA to save for children and grandchildren. The limit for saving in a JISA is £9,000 per annum. One thing to note is that saving in a Junior ISA for a child or grandchild does not use your ISA allowance.
Pension Savings
Most taxpayers in the UK get relief on their personal pension contributions, this will be based on the rate of tax you pay. If you’re a basic rate taxpayer or classed as being on the starter rate in Scotland, you will get 20% relief on pension contributions. Higher and additional rate taxpayers, and top rate taxpayers in Scotland, may get higher relief.
One thing to consider is the annual allowance, this is the amount you can save or grow in your pension before any tax charge arises, the amount of annual allowance is dependant on your personal circumstances so don’t hesitate to contact us for any advice you require.
Charitable Donations
Using gift aid when making charitable donations gives higher and additional rate taxpayers tax relief at the basic rate. It also enables charities to claim a further 25% of your donation at no additional cost to you. You could potentially receive tax relief sooner on gift aid payments by adding a recent charitable donation on to your previous year’s tax return, for example a donation made in September 2023 could be added to your 2022/23 tax return.
Marriage Allowance
This allows an individual to transfer some of their personal tax allowance to their spouse or civil partner. If one partner doesn’t use their entire personal tax allowance for example is employed part time, a portion of this can be transferred to the other partner to reduce the amount of tax payable. For this both parties must be basic rate taxpayers.
High Income Child Benefit Charge
The High Income Child Benefit Charge comes into effect if an individual has an income of over £50,000, this means that some or all Child Benefit would be payable back to HMRC. There maybe potential to move income between spouses to remove this tax charge.
Contact Us:
If any of the above information seems relatable or you’d like to query anything in more detail, please don’t hesitate to get in touch with one of our professional and friendly accountants. You can do this by call/email and an in-depth meeting can be scheduled around yourself if you’d find this beneficial.
At Ultra Tax Ltd we are committed to assisting each and every one of our clients, be assured you’d never be ‘just a number’ to us.
0191 341 0142
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