Tax Year-End Planning 2023/2024

There are a number of planning opportunities which are linked to the tax year-end. You should however act as soon as possible to meet the deadlines as it can take several weeks to carry out the necessary calculations and disinvestments.

CGT Annual Exempt Amount (AEA)

  • The AEA currently allows you to realise capital gains of up to £6,000 in 2023/4 without a tax charge, however this allowance will reduce to £3,000 in 2024/5.
  • Gains could be realised to meet expenses or to reinvest in a more tax-efficient wrapper such as an ISA or a pension, commonly known as a ‘bed and ISA’ or ‘bed and pension’.
  • If you have experienced capital losses, it may be worthwhile realising and registering those losses to offset future gains or shelter your investments in more tax efficient ISA and Pension investments.
  • Investments held within pensions and ISAs are in addition unaffected by the reducing dividend allowance (which will reduce from £1,000 to £500 from 2024).

Pensions Annual Allowance (AA)

  • Pension contributions of up to £60,000 (gross) will attract tax relief at your marginal rate, resulting in a reduced income tax bill and more money in your fund than you have actually paid.
  • While that is good enough for most people, it can get even better if your pension contributions result in a change in your tax bracket. This may be relevant to you if you or your partner’s annual income is likely to fall:
    • Just over the Personal Allowance of £12,570
    • Just over the higher rate tax threshold of £50,270 (£43,662 in Scotland)
    • Between £100,000 and £125,000 (which will reduce your Personal Allowance)
  • Unlike some other allowances the AA can be carried forward from previous years if it has not been fully utilised, allowing you make a single contribution of up to £180,000 in one tax year, depending on your previous contribution record.
  • However, AA may only be carried forward from the previous 3 tax years (when AA was £40,000) and after 5 April any unused AA from the 2020/21 tax year will be lost.
  • If you, or your spouse/partner have no earnings, and are below 75, you can invest £2,880 in your pension and receive an immediate 20% tax relief boost so that £3,600 is invested.

ISA Allowance

  • You and your spouse/partner can each invest up to £20,000 in an ISA every tax year.
  • ISAs are more tax-efficient than most investments (except, arguably a pension) and it could make sense to transfer some of your other assets into this highly advantageous arrangement.
  • With cash interest rates generally remaining low this may also be a good time to reduce the amounts sitting in your bank account. Investing in a Stocks & Shares ISA will allow you to invest for growth and unlike pensions money, ISA investments are accessible at any age free of income tax, making it an ideal ‘rainy day’ vehicle*.

(* We would normally recommend you hold stockmarket-related investments for a minimum term of 5 years.)

IHT allowances

  • The Annual Exemption allows you to gift up to £3,000 each year to friends or family, either as cash or in the form of alternative financial support such as paying towards school fees or making a pension contribution on their behalf.
  • This allowance may also be carried forward up to one year, so that you can effectively gift £6,000 without creating a chargeable transfer.
  • You can also use your small gifts allowance of £250 per person or ‘normal expenditure out of income’ to build up savings for your family outside of your estate.

Please contact us if you would like to know more.

Any news and/or views expressed within this document are intended as general information only and should not be viewed as a form of personal recommendation.