13 March

End of Tax Year 'To Do' List

 

Spring is a great time to look ahead and make any new investments and pension contributions to utilise any unused allowances before the end of the current tax year on 5 April 2024.

 

We have created a checklist to show the tax planning opportunities available if your budget allows, to make your money work hard for you:

 

  1. ISAs

Your ISA (Individual Savings Account) allowance is £20,000 for this tax year and next year. This means you can save up to £20,000 in a Cash or Stocks & Shares ISA, and not pay any tax when you take your money out.

 

It’s a tax-efficient way to save, so make the most of this allowance if you can.

 

  1. Savings accounts

If you have a general savings account which isn’t an ISA it might be worth top these up if you have spare funds. Basic rate taxpayers can earn up to £1,000 of interest tax free each year, while the limit is £500 for higher rate taxpayers.

 

If you earn between £12,570 and £17,570 per year, you could get up to £5,000 of interest on your savings tax-free. This can often apply to people who only receive an income from their state pension. 

 

  1. Pensions

Pensions offer a tax-efficient way to save for your future, a pension fund grows tax-free and with the end of the tax year approaching it is a good time to make the most of the tax benefits they offer by either increasing your monthly pension contribution or making a one-off payment. 

Thanks to pension tax relief, for every £80 a basic rate taxpayer pays in they are saving £100 into their pension pot.

 

Annual Allowance

For most taxpayers, the maximum pension contribution is £60,000 each tax year (previously £40,000). This limit covers contributions made by the individual and by their employer into their pension fund.

 

Pensions can help reduce income, which can trigger other benefits. For example, reducing income below £50,000 may allow you to avoid the high-income child benefit charge.  

 

Any unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused.  So, any unused pension allowance for 2020/21 will lapse on 5 April 2024 if unused.

 

  1. Top Up Your State Pension

The deadline for paying any voluntary National Insurance (NI) contributions is 5 April each year. You can usually pay voluntary contributions for the past six years.

The number of years you pay NI for can affect whether you qualify for the State Pension and how much you’ll get. To receive the full state pension, you need 35 years of National Insurance contributions to qualify. To check the number of qualifying years you can log into your personal tax account to see if there are any gaps and now could be a good opportunity to make these contributions up.

  1. Capital Gains Tax

The annual exemption on Capital Gains tax is reducing significantly in the new couple of years – from £6,000 2023/24 down to £3,000 from 6 April 2024. Capital Gains tax is the tax you pay on the profit when you sell certain types of assets or dispose of shares, and they have increased in value. If you have something worth selling, you may want to consider doing it before the end of the tax year.

 

  1. Gifts

You get an inheritance tax-free gift allowance of £3,000 each tax year. You can give gifts or money up to £3,000 to one person or, split the £3,000 between several people.

You can carry any unused annual exemption forward to the next tax year - but if you don’t use it by the end of that year it’ll be lost. If you’re planning to make a gift to someone, or have an unused allowance from last year, it might be a good idea to do this before the 2023-24 tax year ends.

 

  1. Marriage Allowance

Low earning married couples could save £252 a year with the marriage allowance. This allows one partner who does not use all their £12,570 tax-free personal allowance to transfer 10% of this allowance to their spouse to reduce their tax bill. You can claim this on the government website and claims can be backdated for up to 4 years.

 

Here at Walter Dawson, we have a great Wealth Management Team and for more information on our services, please click here.

 

The information in this article shouldn’t be taken as financial advice, if you are looking to make investments or pension contributions, we recommend seeking guidance from a Financial Advisor.

 

Written by Deb Wood Client Manager and Accountant - WDS Leyburn

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