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  • Writer's pictureLuciano Peria

Year-End Tax Planning Guide for individuals

Updated: Mar 7



The end of a tax year can be a perfect time to take control of your finances.


All too often, however, it can be easy to leave matters to the last minute. Or, worse still, you might not have the time needed to properly consider your situation due to family or work commitments. This is when specialist year-end tax planning advice from Peria & Co can help.

In the UK, there are numerous methods and strategies that can help you take advantage of the reliefs and allowances open to you. Some are widely known. Others, meanwhile, may be complex. What we can do, however, is ensure your end-of-year tax planning needs are met. Doing so can make your wealth work even harder for you and your family.

We have highlighted some key year-end tax planning considerations and options below. Please note that any references to allowances and rates of tax apply to the 2022/23 tax year – unless stated otherwise – and are subject to change beyond this period.


Personal allowance


The first £12,570 of a taxpayer’s income is generally tax free by virtue of the personal allowance. It is important for individual taxpayers to make use of the personal allowance each tax year because it cannot be carried forward.

Non-domiciled individuals claiming the remittance basis are not entitled to a personal allowance.


Inter-spouse transfers


Maximise Capital Gains and Income Tax rates and allowances through these exempt transfers. For individuals whose annual income is between £100,001 and £125,140 this is an ideal way of reducing your tax liabilities.


Looking forward


The income tax personal allowance and higher rate threshold will remain frozen for English and Northern Irish taxpayers at £12,570 and £50,270.


The additional rate threshold will be reduced from £150,000 to £125,140 from 6 April 2023, which will result in taxpayers with income above £150,000 paying an additional £1,243 of income tax. The Welsh government has set its tax rates and thresholds for 2023-24 on a level matching those in England and Northern Ireland.


The Scottish income tax higher rate and top rate will increase to 42% and 47% in 2023-24. The additional rate threshold will be reduced to £125,140 in line with the rest of the UK, while the other thresholds will remain frozen at their 2022-23 levels.


The dividend allowance will decrease from £2,000 to £1,000 from 6 April 2023, with a further reduction to £500 planned from 6 April 2024.


Savings Nil rate Band


For basic rate taxpayers, there is a savings nil rate band of £1,000, for higher rate taxpayers, the savings rate band is £500, and for additional rate taxpayers it is withdrawn altogether. The savings nil rate band is not transferable between spouses, so it is important to ensure that bank accounts are held to maximise the nil rate band. To make use of your spouse’s Savings Nil Rate Band you could do this by electing to transfer savings held in your own name to your spouse.


Exchange your salary for benefits


Consider exchanging part of your salary for payments into an approved share scheme or additional pension contributions, to take you below the £100,000 threshold.


Gifts to Charities


For higher and additional rate taxpayers, it is possible to leverage Gift Aid to receive income tax relief. The benefit to the individual is obvious in that respect – 20% or 25% of the gross value. But it also means a charitable organisation can reclaim the basic rate of tax.

Gift Aid does not just apply to cash donations either. It can also apply if you choose to donate physical assets to a charitable organisation.


Capital Gains Tax


Endeavor to use your annual capital gains tax exemption. Use it or lose it. For the 2022/23 tax year the first £12,300 of capital gains per are tax free.


Consider transferring assets between spouses or civil partners to enable use of combined allowances.


For the 2023/24 tax year, the annual CGT allowance for individuals will reduce to £6,000. This will fall further to £3,000 for 2024/25, so planning now is imperative.


Individual Savings Accounts


Using an Individual Savings Account (ISA) for you and your loved ones can be a sensible year-end tax planning solution. For adults, you can save up to £20,000 in an ISA during a tax year – and any earnings on that amount will be free of income, capital gains, and/or dividend tax.

This means any interest, withdrawals, or profits will be yours to keep in their entirety.


Pensions


Contributions to pension funds within the annual allowance and the overall lifetime limit of £1,073,100 attract relief at your marginal rate of tax. The combination of tax relief on contributions, tax-free growth within the fund, and the ability to take a tax-free lump sum on retirement makes a pension plan an attractive savings vehicle. Saving for retirement should always be considered as part of the year-end tax planning process.


This is particularly important for those with an annual adjusted income in excess of £240,000, since the annual pension contributions limit of £40,000 is tapered by £1 for every £2 of income in excess of £240,000, reducing to a limit of £4,000 for those with income over £312,000. No tax relief is available for contributions in excess of the available annual allowance.


The annual allowance can be carried forward for three tax years. Any unused annual allowance for the three previous years can be added to your allowance for 2022-23 and will attract full relief (subject to the level of pensionable income).


If you are approaching retirement and are considering drawing benefits, take advice to ensure that you understand the tax implications of accessing your pension fund. The National Minimum Pension Age (NMPA) is currently 55 – those aged 55 or over can access their pension fund flexibly, with no restrictions on the amount they can withdraw. They can draw down the entire pension fund if they choose, although there are tax consequences.


What other potential reliefs and allowances are available?


In addition to the options listed above, individuals qualify for other reliefs and allowances. Part of your end-of-year tax planning should consider these – including:

  • Dividend Allowance: up to £2,000 of income from dividends incurs 0% tax. This reduces to £1,000 from the beginning of the new tax year on 6th April 2023. This is something to consider if you hold stocks and shares outside of an ISA.

  • Tax relief on expenses for the purpose of the employment or business – such as membership of a professional body, working from home expenses, and the use of transport for business reasons.

Recommendation


Tax planning can be complex. We would always recommend that you seek professional advice when undertaking a review to ensure all changes are processed and managed effectively.


We hope that you find this guide/checklist useful, but please bear in mind that this only provides a summary of the options you should be considering and not all options will be suitable for everyone.


This guide is for general information only and does not substitute specific advice. You should not rely on it as specific advice and Peria & Co cannot accept any liability for its contents. If you need guidance, please contact us at info@peria.co.uk or call us on +44 (0)1932 849023.

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