Act Now! Your Tax Planning To Do List

By Mark McCann

With the end of the tax year in sight (5 April), Regional Director for Attivo Mark McCann has some tips to maximise your tax breaks.

The end of the tax year is a key time to ensure your financial planning for the current tax year has been optimised. This year it’s more important than ever, with challenging changes to the tax framework introduced by the Chancellor in his Autumn Statement. 

Investing for Growth

You only get one chance to use your annual ISA allowance (£20,000 for each person. So, £40,000 can be invested if your spouse or partner has their allowance available) – once the tax year closes, there are no second chances. ISA interest is tax-free and doesn’t count towards a personal savings allowance. Investing in an ISA should always be top of your to-do list, making sure as much of your investment as possible is held tax-efficiently. 

Investing For Income

With the squeeze on household incomes being keenly felt, checking that your income needs are being met as tax-efficiently as possible is essential. We can advise on a wide range of ways this can be done. For example, some investments pay tax-free dividends, which could help cover a rise in household expenditure. 

Pension Contributions

High earners may be able to reduce their taxable income by putting more money into their pensions. Pensions and pension contributions are still among the most effective ways of providing an income whilst reducing your income tax liabilities. The threshold for the additional tax rate is due to drop to £125,140 from April 2023 (it was previously £150,000), which could make a significant difference to your tax liability. By making pension contributions and taking advantage of any unused annual allowances, you can reduce your tax liability the same time as boosting your pension savings, however, personal advice is necessary to accurately quantify the opportunity. 

Did you know? Personal Income Tax allowances are frozen until April 2028. This means that as your income rises each year, you’ll pay more Income Tax. 

Inheritance Tax (IHT)

IHT is among the most emotive of tax charges, but it can be avoided in many ways. We routinely help our clients navigate this area with confidence, so it’s not inevitable that 

your wealth will be taxed. Because of the range of options available, it can be a complex area, so personal advice is essential to planning effectively for your own circumstances. IHT allowances are also frozen until April 2028, meaning more estates will feel the impact. 

Did you know? As much as £5.3billion was paid in inheritance tax between April and December 2022 – nearly £1billion higher than the same period a year earlier, according to HM Revenue & Customs. 

Capital Gains Tax (CGT)

CGT is effectively a tax on the growth in value of some assets (common examples include property, art, and company shares). The good news is that we all get an individual allowance before we become liable to pay CGT, which is £12,300 in the 22/23 tax year. However, this allowance is set to drop to £6,000 on 6 April 2023 and be slashed further, to £3,000, in 2024/25. If you’re considering selling assets of any kind, careful planning is vital to avoid CGT. Attivo’s Lifestyle Financial Planners will be delighted to support you in this area.