8 things to do before the tax year end

We’re discussing the tax year-end earlier than usual as there’s a lot to cover before April 5th. With the budget’s taxation changes and ongoing modifications to the NHS pension scheme – for anyone even remotely interested in their finances, this year is busy.

Before we start…Before we begin, if you haven’t filed your self-assessment yet and it’s before the 31st of January, you’re running late. So, please stop reading for now and get on with that job first!

Otherwise, keep reading our 8 areas to check and take action before the deadline.

Plan for the end of the financial year - 8 things to check!

1. Use your ISA allowance

Every adult has an ISA allowance of £20,000 for the 2023/24 tax year. Your children also have their own allowance of £9,000 each p.a.

Of course, you have another ISA waiting for you in the next tax-year, but it’s a case of use it or lose it. You cannot contribute to your  2023/24 ISA after the turn of the tax year.

If you are looking for a cash ISA, rates are still strong but falling, and if you are attracted to stocks and shares ISAs make sure you are investing within your attitude to risk and consider taking advice if you haven’t invested in this way before.

You could prepare for the next tax year and set up a regular monthly payment into your ISA for 2024/25. If you plan on using stocks and shares for this one, you would also benefit from ‘pound cost averaging’. 

All you need to know about ISAs: Are you up to date with ISA’s? >

2. Reduce your inheritance tax bill

With the number of estates liable for inheritance tax estimated to increase in the coming years due to the lack of increase in Nil rate bands and the continuing rise in the value of our assets, most notably our homes, it is more important than ever to do what you can each tax year to reduce this problem for the future generations. 

Everyone can give away £3,000 a year without any inheritance tax liability. If you didn’t use your £3,000 gift limit last year, you can carry this forward and gift a total of £6,000 inheritance tax-free this tax year.

And that’s not all you can gift:

  • You can give as many gifts of up to £250 per person as you want each tax-year, as long as you have not used another allowance on the same person.
  • £5,000 to your children when they marry or enter a civil partnership.
  • £2,500 to your grandchildren when they marry or enter a civil partnership.
  • £1,000 to anyone else when they marry or enter a civil partnership.

Now is the time to use as many annual exemptions as possible to reduce the value of your overall estate and minimise the inheritance tax your family will have to pay when you die. Maybe you could forward this article to your parents to remind them of how they can reduce their estate’s IHT liability.

3. Use your Capital Gains Tax (CGT) exemption allowance

One of the most significant announcements making the headlines is the change to the capital gains tax annual exempt amount. For the tax year 2023/24, the exemption will be only £6,000 for individuals.

This change marks a significant reduction in the exemption from the current amount of £12,300 per person. In the next tax year (24/25) and subsequent tax years, the exemption will be permanently fixed at £3,000 for individuals.

Stocks and Shares ISAs and your main residence are capital gain tax-free, but other valuables over £6,000, stocks and shares outside of ISAs, and other properties are all liable for CGT.

You can’t carry over your capital gains tax allowance into the following year. Once the tax year ends, your CGT allowance for that year is gone forever. This is an expensive missed opportunity if you don’t use at least some of your CGT allowance each year. If you have a large capital gain, you may consider crystallising this before the end of the 23/24 tax year to benefit from the £6,000 allowance before it further reduces. 

4. Check your tax code

If you’re a doctor or dentist employed in a single role, your tax code should, in theory, be correct, yet in reality, it isn’t always.

If you are self-employed or have more than one job ensuring you are on the correct tax code is much more complicated.

Whatever your employment status is, it’s worth checking your tax code and seeking advice if you want to be sure it’s correct.

5. Use your personal savings allowance

In addition to your ISA allowances, basic and higher-rate taxpayers also have a personal savings allowance. It means you can earn a certain amount of interest on any non-ISA savings you have without having to pay tax:

  • For basic rate taxpayers, your personal savings allowance is £1,000 a year.
  • For higher-rate taxpayers, your personal savings allowance is £500 a year.

Sadly, additional rate taxpayers do not have a personal savings allowance.

6. Save for your children

The Junior ISA allowance limit of £9,000 provides an opportunity to help your children. Even if you can’t stretch to saving that much for them each year, saving what you can afford allows for compound growth and time to help your children pay for university fees or even get on the property ladder!

If you or your children are under 40 years old a LISA may be worth considering. Read our recent blog.

7. Check your NHS Pension benefit in light of the McCloud remedy

There is much to catch up on regarding your NHS pension, so why not read our other article this month to make sure you are on top of the situation? 

See our recent articles if you need more clarification about these important areas. 

8. Use your dividend allowance

Long gone is the tax-free dividend allowance of £2,000 for individuals. The government reduced the dividend allowance from £2,000 to £1,000 in April 2023 and will reduce it further to £500 from April 2024. Any dividends you earn above this limit will be taxed at 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate).

You should also note that:

  • Dividends received by pensions and ISAs are not included.
  • Dividend income is treated as the top band of income.
  • If you receive dividends of more than the limit and you are a basic rate taxpayer, you need to complete a self-assessment tax return.

As I mentioned, there is much to get your head around and enough to keep you busy for the coming weeks.  As always, please get in touch if you need any help.

Were there some tax savings here you are not aware of? Let us know by adding a comment below.

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