Are you making the most of available tax reliefs?

Author: Tim Parker

Head of Financial Planning and Chartered Financial Planner - Member of the Investment Committee

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With the tax year-end fast approaching and with many allowances, exemptions and tax rate bands either frozen or reducing in the new tax year, now is a good time to review your finances.

Ensuring you are making the most of any available tax reliefs is now as important as ever.

ISAs

Individual savings accounts (ISAs) are a good place to start due to their tax-efficient growth and income. There are a wide range of ISAs available to help achieve your goals and objectives, with cash or stocks and shares ISAs available – as well as Innovative Finance ISAs and LISAs. You can use a combination of these to utilise your £20,000 annual allowance (contributions to a Lifetime ISA are restricted to £4,000).

If you are looking to save for the next generation, there are Junior ISAs (£9,000 annual allowance) and at the other end of the life cycle, there are ISA investments that can help with Inheritance Tax planning.

Pensions

You can contribute up to £40,000 this tax year (5 April 2023) if earnings allow it. You may be able to contribute more if you have unused allowances in the preceding three tax years and were a member of a qualifying pension scheme.

Don’t forget that income in excess of £100,000 effectively suffers tax at 60%. Also, recently announced was the new starting level for additional rate tax (45%) at £125,140, effective 6 April 2023. Tax relief from pension contributions can help with this.

Other points to consider

Whether you are investing personally or as a business owner, or with the help of an accountant, further things to consider:

  • Use your £12,300 Capital Gains Tax annual exemption (£6,150 for Trusts) before it reduces to £6,000 (£3,000 for Trusts) on 6 April 2023. Determine if you have capital losses and consider how these can offset capital gains in the future.
  • With the tax-free dividend allowance reducing and corporation tax increasing, is the way that you extract income from your company still tax efficient?
  • With corporation tax rising, should your employer pay your pension contributions? Or can your contributions be paid via Salary Sacrifice?

Spring Budget 2023

Jeremy Hunt will deliver his Spring Budget on 15 March 2023 – we will summarise all the latest announcements and how they may impact you and your finances in our Spring Budget blog next week.

If you require help with year-end tax planning, please speak to a member of our financial planning team on 01223 233331, or email info@mmwealth.co.uk

Disclaimer 
Opinions constitute our judgment as of this date and are subject to change without warning.  The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

The information in this article is not intended as an offer or solicitation to buy or sell securities or any other investment, nor does it constitute a personal recommendation.

The Financial Conduct Authority do not regulate tax planning.

The information contained within this blog is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

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