Allowances to Remember: Making the Most of Your Tax Planning for 2023/24

Bristol-based Independent Financial Adviser Marcus Rayer discusses key allowances to keep in mind when planning for the 2023/24 tax year end.

You will hear us say time and time again to not leave your end of tax year planning until the very last minute, but why (other than the reduced stress you will feel in Q1 each year)? It is important to structure your plans by considering the various tax allowances available and making the most of these each tax year before they reset and are missed.

Some of these may include:

If you do not utilise your full ISA allowance (currently £20,000 for adults in 2023/24), this cannot be carried forward and will reset in the new tax year. There may also be further opportunities available to consider, such as saving into different types of ISAs, or saving for other family members (eg. children or grandchildren).

When you sell/dispose of an asset and make a profit, this is liable for Capital Gains Tax which has an allowance of £6,000 for the current tax year (2023/24).

However, this is set to reduce to £3,000 for 2024/25. Therefore, utilising the allowance at the higher rate sooner rather than later, where appropriate, can ensure you receive the highest amount of tax relief available.

Some savings outside of ISAs may be taxable, for example, bank and building society accounts, or savings and credit union accounts. The Personal Savings Allowance can depend on your individual Income Tax band, but you may be able to get up to £1,000 of tax-free interest on these in the 2023/24 tax year. Anything above this will be taxed at your usual rate of Income Tax, therefore it is important to structure your savings efficiently to benefit from these allowances each tax year.

Did you know that being married/in a civil partnership can also offer tax benefits? Everyone has a Personal Allowance (PA) (£12,570 for the 2023/24 tax year) which is the amount you can earn tax-free each tax year. The Marriage Allowance in 2023/24 means that up to £1,260, almost 10% of the PA, can be transferred to a spouse/civil partner where one is a Basic Rate taxpayer, and the other has income below the PA.

Effective use of gifts can help to gradually reduce your estate for Inheritance Tax (IHT) purposes, help your loved ones, and ensure to leave you with enough funds for your own financial future. For example, you may wish to gift money to newly-weds, pay for university or school fees, or simply pass on a lump sum to your children. However, if managed incorrectly, you could be taxed or miss out if you do not structure these appropriately in line with the various allowances and rules that apply for each tax year.

Pensions are a tax-efficient saving method for retirement, and it is wise to review your contributions on a regular basis – could you be saving more or contributing to a fund for your children or grandchildren for additional tax savings? Pensions too have time-constrained allowances to be aware of and to take advantage of each tax year. In some cases, you may be able to carry forward unused allowances from previous tax years as well, which an adviser can assist you with.

There are three key generic tax-efficient investments that can offer attractive tax benefits, which include Venture Capital Trusts, Enterprise Investment Schemes, and Seed Enterprise Investment Schemes.

Each type has its own stipulations but can provide varying advantages when it comes to Capital Gains Tax, Business Relief, IHT, and Income Tax. These are not for everyone, and are classed as higher-risk investments, therefore would only be recommended on the basis of a personal financial and taxation position.

Effective tax planning involves making use of the appropriate, complex rules and allowances with the help of an Independent Financial Adviser to ensure you do not miss out on valuable tax savings. Furthermore, the earlier you start, the more time you have to plan.

If you would like to get ahead in planning for the 2024/25 tax year, please do not hesitate to reach out to an Integrity365 Independent Financial Adviser to explore your options on 0117 450 1300. We have advisers situated throughout the UK, with offices in Bristol, High Wycombe, London, Inverness, Arbroath and Helensburgh.