Tax Year End Top Tips

As we approach the end of the financial year on 5th April, the following is a
summary of the key areas to review to make sure your finances are optimised and
tax reliefs where available are claimed.

ISAs

1.  ISAs are free of both income tax and capital gains tax (CGT) and this protection
from tax charges is increasingly valuable. The allowance is still £20,000 per
annum.

2.  Check your spouse or partner has also maximised their own ISA allowance.
That could mean as much as £40,000 invested tax efficiently before the 5th April
2023 and a new allowance then becomes available on the 6th April.

3.  Put up to £9,000 per child or grandchild into Junior ISAs. It’s a great way to
pass money to the next generation, tax efficiently.

4.  If your child is aged 16 or 17, they can use the full £9,000 JISA allowance and a
£20,000 cash ISA allowance.

Pensions

1.  Use your pensions annual allowance by making the maximum tax-allowable
pension contribution available to you. Up to £40,000 pa and tapering to £4,000
pa for high earners. Pensions are under pressure from the government and talks
of potential cuts to pension tax relief are frequent, consequently, there has never
been a better time to utilise this allowance.

2. You can also carry unused pension allowances over from the last three tax years.

3. If you have no earnings a net premium of £2,880 pa can be paid into a pension
and the pension scheme can reclaim basic rate tax from HMRC (which means
£3,600 is invested). Consider opening a pension for your spouse, children or
grandchildren?

4.  Avoid a marginal rate of tax of 60% if your total income is between £100,000
and £125,140 by making personal pension contributions, and/or donations to
UK/EU charities.

5. Have you claimed Higher and Additional rate tax relief on your pension
contributions (as personal contributions only receive basic rate tax relief at
source)? – if you haven’t done this in previous years you can still claim.

6. If you can divert your company’s pre-tax profits into a personal pension, you
can potentially reduce your Corporation Tax, Income Tax (including on dividends)
and NICs contributions.

7. For company directors/shareholders company pension contributions may be
more tax efficient than personal contributions and it is a tax-efficient way of
extracting company assets into your own name.

Other tax allowances

1.  The Capital Gains Tax allowance is being cut; therefore, it is critical to review
and use your ISA allowances. The threshold for paying capital gains tax has been
halved from £12,300 to £6,000 for the 2023/24 tax year and will be cut again to
£3,000 in the 2024/25 tax year.

2. Take advantage of your personal allowance of £12,570. Ensure you are
drawing this from your business tax-free and making national insurance
contributions to maintain eligibility for State Pension.

3. Transfer income yielding-assets to your spouse/civil partner if they pay tax at a
lower rate.

4. If you own a business, consider taking dividend income instead of salary. The
first £2,000 of dividend income is tax-free, reducing to £1,000 in the 2023/24 tax
year and then to £500 in the 2024/25 tax year. You may also be able to minimise
National Insurance contributions too.

5. Use your annual Inheritance Tax gifts exemption of £3,000 PA by making gifts
to loved ones and also consider making regular gifts out of surplus income. These
are Inheritance Tax free and reduce the size of your estate for Inheritance Tax
purposes.

I hope you have found this update useful. And if there is anything you would like
to discuss, please get in touch with your adviser at IEP.

Kind regards,
Patrick Spencer
Managing Director
IEP Financial