Tax Year End – Time To Hatch a Plan

Every now and again, the tax year end (5^th April) coincides with Easter.  At least this year it falls on the Wednesday before, rather than creating added confusion with Bank Holidays creating havoc with deadlines.   As with every tax year, there are some key allowances ‘use it or lose it’ to keep in mind, however in 2023, there are a few other issues to keep in mind.

ISAs – Annual Contribution Limit £20,000

If you have spare cash, maximising your ISA contributions before 5^th April can make sense.  The allowance is the same whether it’s for cash or investment ISAs, and you can always transfer from one type to the other at a later date.

A few key things to look out for:

• If you have any unused allowance, consider topping up this ISA you have already contributed to this tax year
• If you have made withdrawals during the tax year, you may be able to pay those amounts back in (if it’s a flexible ISA)
• If you are unsure whether to choose a cash or investment ISA, don’t be drawn into making a panic decision to invest. Far better to take your time and invest when it’s right for you – so using the Cash ISA will at least use your allowance, and enable you to move the tax efficient funds into an investment in the future

JISA – Annual Contribution £9,000

If you have a child under 18, this allowance gives you the chance to build a valuable lump sum for when they turn 18.

• This can be invested in either Cash or an investment
• It doesn’t impact on the adult’s allowance
• The child has access to the funds from their 18^th birthday (so just be sure you want them to have the money then and not later

Pension Contributions – £40,000

This is the maximum you can generally contribute (gross) as long as your earnings permit.

Before maximising your allowance, be careful to check for any other pension schemes you may be a member of (and have contributions being added) so that you don’t exceed the annual allowance (similarly if you are a high earner).

Every net contribution receives a tax uplift, turning £8,000 to £10,000 – an instant return of 25%

If you are a higher rate taxpayer, there is the added bonus of the gross payment extending your basic rate tax band – potentially saving you an additional 20% income tax.

Capital Gains Tax Allowance

The CGT allowance at present is £12,300, meaning that you can dispose of assets, making a gain up to this amount without paying CGT.  On April 6^th, the allowance drops to £6,000, and the following year (2025) to £3,000.

If you are planning to sell an asset with a chargeable gain, time is of the essence to catch this tax year.

Dividend Allowance

There is also a series of reductions for the Dividend Allowance.

Presently £2,000, we will see a drop on 6^th April to £1,000, and a further one in 2024 to £500.

Finally, some good news (almost)…

The threshold for National Insurance is increasing to match the income tax threshold of £12,570.

However, whilst this has been increased due to rising inflation, no other tax allowances are moving upwards, thus creating an effective tax increase as people’s salaries increase.

As always, before taking any action, get in touch with your Serenity planner who will be only too pleased to guide you through any end of tax year planning which is appropriate to you.