Pre-tax year end planning 2023

20 February, 2023

With tax year end approaching, you should be thinking about the tax reliefs and allowances currently available. This could lead to a reduced tax bill and potentially increase savings.

We have created a checklist of our top 10 pre tax year end planning considerations for you to review.

Tax planning
  • Maximise this year’s pension contributions: Individuals can contribute up to 100% of their income capped at £40,000 and attract tax relief at their highest marginal rate. The restrictions for high earners changed in April 2020, lifting the income level where the £40,000 allowance begins to taper down from £150,000 to £240,000, allowing for greater scope to contribute for many.
  • Use your “Carry Forward” allowance: Individuals who have already paid the maximum pension contribution for this year are allowed to go back three tax years and carry forward unused pension contributions. Unused pension Contributions from tax year 2019/20 will not be available from April 6th 2023.
  • Maximise your ISA allowances: Individuals aged over 18 can save and invest up to £20,000 per tax year with no liability to income or capital gains tax. Junior ISA limits increased to £9,000 in the previous tax year. There are a number of other ISA arrangements which may merit consideration.
  • Consider utilising your Capital Gains allowance: The allowance is £12,300 in the current tax year. This will be reduced down to £6,000 from April 6th 2023.
  • Dividend Planning: The first £2,000 of dividend income is not taxable and thereafter tax rates are generally lower than income tax rates. This will be reduced down to £1,000 from April 6th 2023.
  • Inter-Spouse Planning: Income producing assets can accumulate in one spouses name causing high levels of personal tax whereas the other spouse may not be using their full range of tax allowances. Many inter-spouse transfers are tax free so consideration should always be given to couples owning assets in a way that minimises income or capital gains tax.
  • Venture Capital Trusts and Enterprise Investment Schemes: for clients with a higher risk appetite and longer time frame these investments attract generous tax reliefs and could be considered as part of an overall portfolio. Like pensions and ISA’s there are investment limits each tax year.
  • Charitable Giving: Gift Aid allows you to claim income tax relief at your highest marginal rate and charitable giving is generally is not subject to IHT.
  • Income Tax Planning: Generally income tax is the personal tax we pay the most so give careful consideration to application of your personal allowance, which tax bands your overall income will fall into and assess the best way to mitigate the higher tax rates through application of the allowances we have highlighted.
  • Inheritance Tax annual allowances: Estate planning is a multi-year planning issue but there are a number of tax year related planning issues such as utilising the individual annual £3000 IHT free gift allowance or £250 small gift allowance that could be considered to mitigate an ongoing IHT liability.

These are some of the general considerations for your personal financial planning and there maybe others to consider. With the Budget only a few weeks away please feel free to contact our advisers should you wish to discuss any of these topics further.

This information is based on our current understanding of the rules for the 2022-23 tax year.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

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