Tax Planning

Tax Year End Checklist

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Personal tax planning should be at the top of your agenda as the end of the current tax year is not too far away. Taking action now may give you the opportunity to take advantage of any remaining reliefs, allowances and exemptions.

At the same time, you should be considering whether there are any planning opportunities that you need to consider either for this tax year or for your long-term future.

Feel you need to talk about a tax year end tax health check?

We hope you find this checklist useful, but please bear in mind that this only provides a summary of the options available and not all options will be suitable for everyone. Please do contact us if you would like more information on any of the areas outlined above.

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What are the tax implications when I receive my pension pot?

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As expert Financial Advisors we are here to make the complex straight forward. We work with you to ensure you maximise all tax relief available and to look at all your current and future finances to mitigate a whole range of liabilities including inheritance tax, income tax and capital gains tax.

Ensure your investments are tax efficient

The UK tax system is notoriously complex, but the benefits of structuring your finances tax efficiently can be significant. It is important to keep up with any changes that could affect your tax position now and in the future.

If you’d like to speak to us about tax implications surrounding your pension, please get in touch

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Tax Year End: Time for a Tax Health Check?

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As the financial year draws to a close the clock is ticking and it is important to utilise all the tax reliefs and allowances available to you before 5 April 2024 in order to minimise any potential liabilities.

Personal tax planning should be at the top of your agenda as the end of the current tax year is not too far away. Taking action now may give you the opportunity to take advantage of any remaining reliefs, allowances and exemptions.

At the same time, you should be considering whether there are any planning opportunities that you need to consider either for this tax year or for your long-term future.

We’ve listed a few reminders of the issues you may want to consider as worthy of including in your 2023/24 tax health check to-do list.

Some key things you might need to action before the tax year end

Personal reliefs: Married couples should consider utilising each person’s personal reliefs, as well as their Pension drawdown: If you are 55 or over you could access 25% tax-free cash from your Defined Contribution (also known as Money Purchase) pension pots and invest the rest.

However, drawing large amounts in one tax year can lead to a larger tax bill than if spread over a longer period. Do you know the implications of taking money out of your pension pots?

Passing on your pension: Usually called a ‘spousal by-pass trust’, although the recipient may not always be a spouse, this is a discretionary trust set up by the pension scheme member or pension holder to receive pension death benefits. Are your pension death benefits written in trust?

Pension Annual Allowance: Maximising pension contributions up to the current £60,000 in 2023/24 offers maximum tax efficiency. The annual allowance is tapered (reduced) for higher earners. It is reduced by £1 for every £2 someone earns over £260,000 (including pension contributions). Tapering stops when the annual allowance reaches £10,000.

Pension Lifetime Allowance: In 2023/24, the standard lifetime allowance for most people is £1,073,100. At the Spring Budget 2023, the Government announced that it would abolish the lifetime allowance. It started this process by removing the tax charge for exceeding the lifetime allowance from 6 April 2023 encouraging greater (and tax efficient) pension contributions by all. Could you take greater advantage of these pension related tax efficiencies?

Individual Savings Accounts (ISAs): An ISA allows you to save and invest tax-efficiently into a cash savings or investment account. The proceeds are shielded from Income Tax, tax on dividends and Capital Gains Tax. The Government puts a cap on how much you can put into your ISA or ISAs in any tax year (from 6 April to 5 April). The ISA allowance for 2023/24 is set at £20,000. Have you fully utilised the maximum annual allowance?

Junior ISAs: This is a long-term tax-efficient savings account set up by a parent or guardian, specifically for the child’s future. Only the child can access the money, and only once they turn 18. Have you invested the maximum £9,000 allowance for your child or children?

Lifetime ISAs (LISAs): The Lifetime ISA (LISA) is a tax-efficient savings or investments account designed to help those aged 18 to 39 at the time of opening to buy their first home or save for retirement. The government will provide a 25% bonus on the money invested, up to a maximum of £1,000 per year. You can save up to £4,000 a year, and can continue to pay into it until you reach age 50. Could you be taking advantage of this very tax-efficient option?

Capital Gains Tax (CGT): There are two different rates of CGT – one for property and one for other assets. If your assets are owned jointly with another person, you could use both of your allowances, which can effectively double the amount you can make before CGT is payable. If you are married or in a registered civil partnership, you are free to transfer assets to each other without any CGT being charged. It is currently £6,000 from 6 April 2023 and £3,000 from 6 April 2024. Have you fully used your annual exemption?

Inheritance Tax (IHT) relief: IHT must be paid on the value of any estate above £325,000, or up to £1 million for married couples including the residence nil-rate band). However, certain business assets, including some types of shares and farmland, in private trading companies can qualify for 100% relief from IHT. The Government has frozen the IHT thresholds for two more years to April 2028. Are you taking advantage of the reliefs available to you?

Residence nil-rate band (RNRB): This allowance was introduced during the 2017/18 tax year and is available when a main residence is passed on death to a direct descendant. The allowance is currently £175,000. When combined with the nil-rate band of £325,000, this provides a total IHT exemption of £500,000 per person, or £1 million per married couple. If you are planning to give away your home to your children or grandchildren (including adopted, foster and stepchildren) the RNRB must be claimed.

There is a form for this purpose – IHT435. The form is available on the Gov.uk website. If applicable, have you applied for the RNRB?

Charitable and personal gifts: If you leave at least 10% of your net estate to charity a reduced inheritance rate of 36% applies rather than the usual 40%. Other exemptions apply for inter-spousal transfers, transfers of unused annual income, business and agricultural assets, and for various other fixed, small amounts. Are you intending to make gifts before the end of the current tax year?

Trust funds: These help protect your assets and guarantee that your loved ones have financial stability for their future. Crucially, a trust can help to avoid IHT and ensure that the majority of your money, shares and equity are passed on in the most efficient way. Should you consider setting up a trust? Future legislation could potentially result in changes to tax law, which could in turn require adjustments to your plans.

Feel you need to talk about a tax year end tax health check?

We hope you find this checklist useful, but please bear in mind that this only provides a summary of the options available and not all options will be suitable for everyone. Please do contact us if you would like more information on any of the areas outlined above.

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7 Benefits of Financial Planning

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7 Benefits of Financial Advice

Whether you want your money to work harder or if you are approaching retirement and want to make informed decisions about your pension options we will offer expert, qualified advice at every stage of your journey.

  • To help you build your assets
  • To help you achieve your financial goals
  • To plan the right investment strategy for you
  • To help you tax plan efficiently
  • To help you plan for retirement
  • To protect you and your family
  • To give you financial peace of mind

We will work together with you to create a holistic, comprehensive financial plan to achieve your goals. Please get in touch with us for more information.

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Give while you live

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What will your financial legacy look like?

April 2023 brought a host of changes to the UK’s tax regime, with some thresholds for taxes such as additional rate Income Tax being lowered while others, such as Corporation Tax, are increased.

However, the Inheritance Tax (IHT) nil-rate band has remained stagnant at £325,000 since 2009, despite the meteoric rise in property prices over the same period. This has resulted in an all-time high of £6.1bn being collected in Inheritance Tax in 2021/22.

Freezing of the nil-rate band

Chancellor Jeremy Hunt announced in the Autumn Statement on 17 November 2022 that the government had frozen the IHT thresholds for two more years. As the threshold was already frozen until April 2026, it means that the threshold is now frozen until April 2028.

If you own a home worth over £1 million, there is a risk that your loved ones may face a costly IHT bill upon inheritance, due to the freezing of the nil-rate band. While there is an additional residence nil-rate band (RNRB) of £175,000 that can apply when passing on the property you lived in, married couples or those in registered civil partnerships can transfer the allowance, enabling most couples to pass on up to £1 million tax-free, assuming they pass on their home to their direct descendants.

Wealth to future generations

However, if your total estate exceeds £2 million, the RNRB will be tapered. For every £2 by which your individual estate exceeds £2 million, the RNRB will be decreased by £1. Professional financial advice can help homeowners plan to mitigate the impact of IHT.

Downsizing is a popular method to manage IHT, but this presents the challenge of passing on the sale balance to your loved ones. Planning for the transfer of wealth to future generations can be an uncomfortable topic for many families. However, proper estate planning can ensure a smooth and stress-free transition of family wealth to loved ones.

Feeling financially squeezed

It’s understandable that many people are feeling financially squeezed in the current climate, and as a result, we are likely to see a rise in ‘giving while living’. This refers to the practice of lifetime gifting to loved ones, particularly adult children who may be struggling to make ends meet during the ongoing cost of living crisis.

However, it’s important to note that the extended freeze on thresholds will mean that many people will now need to seek professional financial advice more than ever to protect their wealth and ensure that it is passed on according to their wishes, without being caught out by unforeseen taxes in the future.

Your family’s financial future?

We understand the importance of addressing these issues in a calm and objective manner. We can assist you in creating a comprehensive succession plan that maximises the amount of wealth passed down to future generations while minimising tax implications. Let us help you secure your family’s financial future with careful estate planning. To find out more, please speak to us.

Source data: [1] https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk/hmrc-taxreceipts-and-national-insurance-contributions-for-the-uk-new-annual-bulletin#inheritance-tax

Important information: This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. Inheritance tax and estate planning are not regulated by the financial conduct authority.

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IHT, pensions & ISAs

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The UK tax system is notoriously complex, but the benefits of structuring your finances tax efficiently can be significant.

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Income Tax Rates

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We work with you to ensure you maximise all tax relief available and to look at all your current and future finances to mitigate a whole range of liabilities such as income tax, VAT and corporation tax.

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Tax Facts

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Income Tax Rates

Non-savings, non-dividend income – England, Wales, NI

2022/23 Band 2023/24 Band
Basic rate: 20% £0 – £37,700 Basic rate: 20% £0 – £37,700
Higher rate: 40% £37,701 – £150,000 Higher rate: 40% £37,701 – £125,140
Additional rate: 45% Over £150,000 Additional rate: 45% Over £125,140

Non-savings, non-dividend income – Scotland

2022/23 Band 2023/24 Band
Starter rate: 19% £0 – £2,162 Starter rate: 19% £0 – £2,162
Basic rate: 20% £2,163 – £13,118 Basic rate: 20% £2,163 – £13,118
Intermediate rate: 21% £13,119 – £31,092 Intermediate rate: 21% £13,119 – £31,092
Higher rate: 41% £31,093 – £150,000 Higher rate: 42% £31,093 – £125,140
Top rate: 46% Over £150,000 Top rate: 47% Over £125,140

Savings and dividend income – UK

2022/23 2023/24
Savings income – basic rate 20%* 20%*
Savings income – higher rate 40% 40%
Savings income – additional rate 45% 45%
Dividends – basic rate 8.75% 8.75%
Dividends – higher rate 33.75% 33.75%
Dividends – additional rate 39.35% 39.35%

*0% starting rate on up to £5,000 of savings income for 2022/23 & 2023/24. Not available if non-savings/non-dividend income exceeds this limit.

Trusts Standard Rate Band £1,000

Income Tax Allowances – UK

Allowances 2022/23 2023/24
Personal allowance (PA)* £12,570 £12,570
Married couple’s allowance (MCA) ø Spouse/civil partner born before 6.4.1935 £9,415 £10,375
Minimum MCA £3,640 £4,010
Blind person’s allowance £2,600 £2,870
Marriage allowance** £1,260 £1,260
PA income limit £100,000 £100,000
MCA income limit £31,400 £34,600
Dividend allowance £2,000 £1,000
Personal savings allowance Basic rate tax taxpayers £1,000 £1,000
Higher rate taxpayers £500 £500

* PA reduces by £1 for every £2 adjusted net income exceeds PA income limit.

ø MCA relief at 10% if at least one spouse/civil partner born before 6.4.1935. Reduces by £1 for every £2 adjusted net income exceeds MCA income limit, but not below minimum.

**One spouse/civil partner can transfer up to 10% of their PA to the other, provided neither is liable to tax above the basic rate.

Value Added Tax

From 1.4.2022 From 1.4.2023
Standard rate 20% 20%
Registration level £85,000 £85,000
De-registration level £83,000 £83,000

Corporation Tax

Year to 31.3.2023 Year to 31.3.2024
All taxable profits 19% n/a
Small profit rate – taxable profits up to £50,000 n/a 19%
Main rate – taxable profits over £250,000 n/a 25%
Marginal relief fraction n/a 3/200

Capital Gains Tax

Exemptions 2022/23 2023/24
Individuals & LPRs* £12,300 £6,000
Trusts £6,150 £3,000

*Legal personal representatives (LPRs) are entitled to the annual exemption in the tax year of death and the next two tax years.

Rates 2022/23 2023/24
Individuals’ gains:

•   within available basic rate band

•   on the balance

  

10%*

20%*

  

10%*

20%*
Trustees’ & LPRs’ gains 20%* 20%*
Business asset disposal relief •   10% on the first £1m lifetime gains

•   10%/20%* on the balance

 •   10% on the first £1m lifetime gains

•   10%/20%* on the balance
Investors’ relief •   10% on the first £10m lifetime gains

•   10%/20%* on the balance

 •   10% on the first £10m lifetime gains

•   10%/20%* on the balance
* 18% & 28% rates apply to carried interest & residential property not covered by principal private residence relief.
Companies’ gains charged at corporation tax rate. Indexation allowance is frozen for disposals from 1.1.2018.

Inheritance Tax

Chargeable transfers 2022/23 2023/24
Standard nil-rate band £325,000 £325,000
Residence nil-rate band (available only on death, subject to conditions) £175,000 £175,000
Tax on excess value of chargeable transfer on death and lifetime transfers made within seven years of death 40% 40%
Tax on excess value for chargeable transfers on death where 10% or more of net estate left to charity 36% 36%
Tax on excess value for other chargeable lifetime transfers 20% 20%
Reduced tax charge on gifts within seven years before death (taper relief)
Years before death 0–3 3–4 4–5 5–6 6–7
% of death charge 100 80 60 40 20

Main exemptions
Gifts to charities Unlimited
Gifts between UK domiciled spouses Unlimited
Annual £3,000
Small gifts to any one person £250
 

Gifts on marriage/civil partnership from:

 Parent £5,000
Party to marriage/civil partnership or grandparent £2,500
Other £1,000

Pensions – Maximum Contributions Limit

The maximum amount of contributions on which a member can claim tax relief in any tax year is the greater of:

  • the ‘basic amount’ – currently £3,600 gross, and
  • the amount of the individual’s relevant UK earnings that are chargeable to income tax for the year.

Lifetime Allowance

Tax Year Amount
2020/21 to 2023/24 £1,073,100

Lifetime Allowance Charge: For tax years up to 2022/23, 55% on excess paid as a lump sum and 25% on excess designated for drawdown, annuity or scheme pension. In 2023/24, the 25% and 55% LTA charges don’t apply and excess lump sums are taxed at the member’s marginal rate of income tax.

Annual Allowance

Tax Year AA Amount MPAA Amount
2017/18 to 2022/23 £40,000# £4,000
2023/24 £60,000# £10,000

Annual Allowance Charge: marginal income tax rate on excess, subject to a minimum of 20%.

Carry forward of up to three years unused annual allowance available.

Money Purchase Annual Allowance (MPAA): applies with no carry forward to money purchase pensions once flexible pension income taken.

# Tapered annual allowance: for 2020/21 to 2022/23, tapered by £1 for every £2 of ʻadjusted incomeʼ over £240,000 to a minimum of £4,000 if ʻthreshold incomeʼ is over £200,000.

For 2023/24, tapered by £1 for every £2 of ‘adjusted income’ over

£260,000 to a minimum of £10,000 if ‘threshold income’ is over £200,000.

ISA Limits

Overall Limit
ISA 2022/23* £20,000
ISA 2023/24* £20,000
Junior ISA / Child Trust Fund 2022/23 £9,000
Junior ISA / Child Trust Fund 2023/24 £9,000

*Eligible savers can contribute up to £4,000 of the overall ISA limit to a Lifetime ISA.

The spouse/civil partner of deceased ISA saver has an additional ISA allowance equal to the value of the deceased’s ISA(s) at the date of death.

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Top tips to minimise Capital Gains Tax

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Capital Gains Tax (CGT) is a form of taxation imposed on profits earned from the sale of certain types of assets. For a more detailed look at ways to minimise or even avoid CGT, read our latest CGT article.

Getting financial advice early and planning ahead is crucial before you sell an asset. Please get in touch to discuss the tax planning services we offer.

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Capital Gains Tax

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Minimising or even avoiding capital gains tax (CGT) liabilities

Getting advice early and planning ahead is imperative before you sell an asset

Capital Gains Tax (CGT) is a form of taxation imposed on profits earned from the sale of certain types of assets. Gains are calculated by subtracting the purchase price and related expenses (such as sales charges) from the selling price. They are generally taxed at a rate higher than income taxes in order to discourage speculation.

If you plan to sell assets that have appreciated in value, such as real estate, stocks or bonds, it is important to be aware of CGT and how it can affect your bottom line. Proper planning can help you minimise or even avoid CGT liabilities.

For years, the annual CGT exemption has been a useful way of reducing your liability for CGT on any profits you may make from investments or disposals of assets.

But with news in last year’s Autumn Statement that this exemption will be cut to £6,000 in 2023/24 and £3,000 in 2024/25, now is the time to take action if you want to protect your tax-free allowance.

Here are some ways to potentially reduce your CGT liability.

Use your CGT exemption

By now you should have made full use of the previous 2022/23 CGT exemption, taking into account the upcoming reduction of this exemption commencing from the next tax year. The Chancellor, Jeremy Hunt, in his Autumn Statement last November announced that the CGT personal allowance will be more than halved to £6,000 from April 2023, and halved again to £3,000 in April 2024.

It is important to consider making any capital gains during and before the end of this current 2023/24 tax year, in order to maximise your CGT exemption. This approach will ensure that you are able to take advantage of all available resources and protect yourself from incurring a larger liability down the line.

Make use of losses

When reporting capital gains to HM Revenue & Customs (HMRC), you may be able to reduce your tax liability by making use of losses. Losses and gains realised within the same tax year must be offset against each other, which in turn can help lower the overall gain that is taxable.

Furthermore, any unused losses from earlier years can be carried forward for use, provided they are reported to HMRC within four years from the end of the corresponding tax year in which the asset was sold. It’s important to keep accurate records of all losses and gains so as professional advice can be sought when necessary. This can help ensure that you make the most out of available reliefs and minimise your CGT liability accordingly.

Transfer assets to your spouse or registered civil partner

Couples and registered civil partners can take advantage of their combined annual CGT exemption by transferring assets between them.

This is a tax-exempt transfer as long as it is a genuine, outright gift. By taking advantage of this exemption, couples and registered civil partners can benefit from increased capital gains opportunities that wouldn’t otherwise be available on an individual basis. The assets can be any type of property or investments that are liable to CGT, such as stocks and shares, land, buildings, business assets or personal possessions.

It’s important to note that the transferred asset will become part of the receiving partner’s estate for Inheritance Tax purposes in the event of their death. This could potentially result in a larger Inheritance Tax bill, so professional advice should be sought before making any transfers. In addition, if the transfer takes place when the asset has appreciated in value, it’s important to consider whether it would benefit you more to pay CGT on the gain before transferring the asset and using your single annual exemption instead.

Invest in an ISA (Bed and ISA)

Investing in an ISA can be beneficial for higher and additional rate taxpayers due to its exemption from CGT, so it is important to consider this option when making financial decisions. Gains and losses made on investments held within an ISA are exempt from CGT. Utilising the ‘bed and ISA’ tactic can be a professional way to maximise tax savings.

’Bed and ISA’ is a way to invest without being exposed to the tax implications associated with CGT. By selling assets to realise a capital gain and then immediately buying back the same assets inside an ISA, all future gains can be exempted from CGT.

This helps investors make the most of their ISA allowance each year. Investors need to understand that they may pay stamp duty and other costs when repurchasing investments in an ISA and there is a risk that time out of the market, however small, will detrimentally impact your investments.

Contribute to a pension

Making regular pension contributions from relevant earnings is a highly effective way to save on CGT. A pension provides an ideal opportunity for those looking to reduce their CGT burden while ensuring their funds remain secure in the long term. Investing in pensions could not only make you more tax-efficient but provide peace of mind that your money will still be available when needed most .

By contributing to your pension, you can effectively increase your upper limit of the Income Tax band.

Give shares to charity

One of the most rewarding ways to support a charity is to donate shares. By donating qualifying shares, you may be eligible for Income Tax relief and CGT relief from HMRC. This means that the value of your donation could be worth more than if you had donated money or other assets. It’s important to remember that only certain types of UK shares qualify for CGT relief, so it’s best to consult professional financial advice before making any donations.

Additionally, as with all donations, it’s important to keep records of your gifts in case HMRC needs further information at a later date. Donating shares to charity can be an incredibly meaningful way to show your support whilst also benefiting from generous tax relief.

Invest in an Enterprise Investment Scheme

Enterprise Investment Schemes (EIS) allow investors to benefit from CGT relief on investments. This tax relief applies to qualifying investments in smaller, unquoted trading companies and can significantly reduce the amount of CGT due as well as providing other potential benefits. Any gains made on investments in an EIS are tax-free if held for at least three years from the later of the date of issue or the date the qualifying trade begins.

Moreover, it is also possible to defer a capital gain by investing that gain in an EIS qualifying company but only within one year before or up to three years after the gain arose. Once money is taken out of the EIS qualifying company, the deferred capital gain will come back into charge. When investing in an EIS, professional advice should always be sought to ensure that you are making the most suitable decision for your individual circumstances. This scheme is higher risk than more traditional investments, so investors need to make sure that they fully understand the risks associated.

Claim gift hold-over relief

Gift hold-over relief is a tax consideration for anyone transferring business assets. If you meet the requirements, then you are eligible for a tax reduction when giving away certain business assets. To be eligible, there must be a genuine gift of the asset and the recipient must not make any payment in return. In addition, both parties must agree to the transfer and it must have been made at least one year before the date of sale by the recipient.

If you do qualify for gift hold-over relief, then you won’t have to pay CGT on the gifted assets; however, if they are subsequently sold by the recipient they may incur CGT liabilities . It’s important to note that it must be proven that the asset was given away and not sold in order for the relief to apply. If you’re considering utilising gift hold-over relief, professional advice is advised as there are a number of conditions that must be met before being eligible.

Chattels that escape CGT

Chattels are personal possessions, such as antiques and collectibles, for which CGT does not always apply. Wasting assets – items with a predictable life of 50 years or fewer – may be exempt from CGT altogether provided they were not eligible for business capital allowances.

For non-wasting chattels, the CGT position depends on the sale proceeds, those under £6,000 usually being free of tax. It is important to seek professional advice if you are unsure about any aspect of CGT relating to your chattels so that you can ensure that you comply with the relevant legislation.

Seek professional advice

When it comes to CGT, professional advice is essential. Seeking professional financial advice can help you understand your CGT options, make sure you are taking advantage of all tax reliefs, allowances and exemptions available to you and advise on the best course of action for your individual circumstances.

We provide comprehensive professional advice and can help guide you through the complexities of CGT. We understand that each person’s financial situation is unique, so our tailored advice will ensure that you get the most from your investments. Please get in touch to discuss how our tax planning services can help you.

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