Tax year end guide
Tax year end guide 2023 / 24
As the new tax year is about to start, some important rules and regulations are changing. Now is a great time to look at these changes and think about how they could help you to maximise your finances.
It is important that you align these allowances with your personal financial objectives and make them work for you, enabling you to grow and achieve your financial goals.
We have outlined seven key allowances below, which you may wish to consider before the close of the 2023/24 tax year:
Marriage Allowance
Allowance for 2023/24: £1,260
Transferring the unused Personal Allowance from your spouse or civil partner could potentially reduce your tax liability by up to £252 in the 2023/24 tax year. Eligibility criteria apply, and there is an opportunity to backdate the allowance for up to four years until 5th April 2024.
ISA Allowance
Allowance for 2023/24: £20,000
Individual Savings Accounts (ISA’s) offer tax-efficient avenues for saving or investing. With various types, including Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, Innovative Finance ISAs, and Help to Buy ISAs, consider utilising the £20,000 allowance before the tax year concludes.
From April 2024, new changes will permit multiple subscriptions to ISAs of the same type every year and to allow partial transfers of ISA funds in-year between providers.
JISA Allowance
Allowance for 2023/24: £9,000
Junior ISAs (JISA’s) provide a tax-efficient mechanism for saving or investing for a young person. With a limit of £9,000 per person for the tax year, explore the options of Cash JISAs or Stocks and Shares JISAs before the allowance expires.
Dividend Allowance
Allowance for 2023/24: £1,000
If eligible, you may wish to consider receiving dividends within the £1,000 allowance to potentially increase your income in a tax-efficient manner. Dividends falling within the allowance are not subject to tax, and rates vary based on your Income Tax band.
Whilst the tax rates on dividend income will remain at their current levels, from April 2024 the Dividend Allowance will reduce from £1,000 to £500.
Capital Gains Tax Annual Exempt Amount
Allowance for 2023/24: £6,000
Exercise judgement in managing Capital Gains Tax by adhering to the Annual Exempt Amount covering assets such as property and investments. Explore strategies to handle gains within the exemption limit before the tax year concludes.
Under current rules you can make gains of up to £6,000 before paying any Capital Gains Tax, but from April 2024 this allowance will be reduced to just £3,000.
Pension Annual Allowance
Allowance for 2023/24: £60,000
With the heightened Annual Allowance for pensions, you could consider optimising contributions for tax relief. Be knowledgeable of potential reductions in cases of prior pension income or adjusted annual income surpassing £260,000.
Inheritance Tax Annual Exemption
Allowance for 2023/24: £3,000
Strategically plan for Inheritance Tax by utilising the annual exemption of £3,000, or £6,000 if planning with a partner. This facilitates the transfer of wealth without immediate concerns about its inclusion in your estate for Inheritance Tax purposes.
Pensions Lifetime Allowance
Starting from April 2024, there will be changes to the Pensions Lifetime Allowance (LTA). These changes will mean that you can now take as much money as you want from your pension, but you will still have to pay income tax on it. Drawing on large sums of money at once will be monitored and subject to two new allowances:
- A 'lump sum allowance' set at £268,275. This is a quarter of the current lifetime allowance of £1,073,100. It essentially measures the tax-free cash you take from your pension throughout your life.
- A 'lump sum and death benefit allowance' set at £1,073,100. This allowance considers any tax-free lump sums you take while you're alive, plus any serious ill health lump sum and lump sums paid out when you pass away.
Someone who exceeds any of these allowances will see the excess taxed in the same way as income.