With the end of the tax year fast approaching (5 April), you should assess your current tax situation and utilise the reliefs and allowances available.
Here are a few tax quick wins you can consider to help reduce your liabilities now and in the future:
Inheritance Tax (IHT)
Each tax year, individuals can give away up to £3,000 worth of assets or cash without adding it to the value of their estate, referred to as your ‘annual exemption’.
You can carry your unused annual exemption over to the next tax year.
Capital Gains Tax Allowances
Capital Gains Tax (CGT) is chargeable when you sell or dispose of an asset and make a profit. You pay tax on the amount you gain from the sale or disposal.
UK residents can make a certain amount of gains each tax year before being charged CGT, known as the Capital Gains Tax Exemption.
The 2022/23 amount is £12,300 but will fall to £6,000 for 2023/24 before being reduced to £3,000 for 2024/25.
You should ensure that you are using your CGT Exemption before the end of the tax year and plan disposals to take advantage of the current higher rate.
Personal Allowance
Each individual is entitled to their personal allowance (PA), set at £12,570 for 2022/23, which can get partly transferred between spouses and civil partners. The Marriage Allowance of £1,260 can get transferred but only where neither spouse/civil partner pays tax at the higher rate.
Annual Pension Allowance
Ensure you utilise your annual pension allowance (APA) as a vital way to save tax. The current APA allows most individuals to invest up to £40,000 a year before applying tax. The annual pension allowance can get carried across several years if it is unused.
Individual Savings Accounts (ISAs)
You pay no Income Tax on the interest or dividends you receive from an IS. Any profits from investments are free of Capital Gains Tax. You can pay your allowance of £20,000 (for 2022/23) into a Stocks and Shares ISA, a Cash ISA or any combination of these.
Taking advantage of these allowances will save you and your business money. It is good practice to repeat the process every tax year. However, as these are basic suggestions, we advise you to speak with a tax professional for further guidance. Our tax advisors are on hand to help you. You can arrange a free initial consultation here.
