New Tax Year! | New You! Be savvy around tax-efficient savings.
It’s a New Year – plan for a ‘new you’.
A new tax year is approaching. Now, more than ever, it’s important to plan and understand how to use the tax limits available to you.
This year’s Spring Budget saw some changes to limits, and some staying the same.
So where do you stand, and what can you do to boost your plans for the future?
What’s Changing?
Pension Allowances
Lifetime Allowance charge will be removed from April 2023 and abolished from April 20241. The Annual Allowance is increasing from £40k to £60k on the 6th April 20232.
Capital Gains Tax (CGT)
CGT is tax you pay on the profit of an asset you sell, such as investments, a second property or other items deemed an investment. The CGT allowance is the amount of gain you can make without paying tax.
Your personal CGT allowance for 2022 was: £12,3003.
However, as of April 2023 your CGT allowance is £6,000 and will decrease to £3,000 in April 20244.
Therefore, taking these reductions into account, if you are planning to sell something that will generate a CGT liability, understanding these changes and how they will affect you is essential.
Remember, if you don’t use your CGT allowance in one tax year, you cannot carry it forward to next year.
For advice on how to manage your decrease in the CGT allowance, talk to your Independent Financial Adviser.
Next…
Dividend Income
Dividend Allowance (tax free allowance for income paid from dividends) will be reduced as of 6th April 2023 from £2,000 to £1,000. In April 2024, it will be halved again to £5005.
One way to counteract this decrease in allowance and potential increase in tax, is to hold your shares or funds in a stocks and share ISA or SIPP (self-invested personal pension).
Again, our professional Independent Financial Advisers can advise you on the best course of action. They are not affiliated with any specific plan or scheme and can therefore tailor a strategy to suit your own individual requirements.
What’s Not Changing?
ISAs
ISAs provide tax free returns on growth and income. You do not pay CGT or income tax on money held within an ISA, which means they are a brilliant planning tool for your future.
The main ISA allowances are:
- ISA – £20,0006
- Junior ISA – £9,0007
There are rules about who can invest into ISAs, and it is important you understand the benefits and risks attached to each one. ISAs are a ‘use it’ or ‘lose it’ allowance, therefore if you don’t take advantage in the current tax year, you have lost that allowance.
And finally…
Other Taxes
The Personal Allowance remains the same at £12,570 and will stay frozen until April 20288.
The 45% additional rate of income tax threshold will be lowered £150,000 to £125,140 from 6th April 20239.
Please note: Scotland has different tax rates and tax bands.
Inheritance Tax (IHT)
Nil rate band (NRB) and residence nil rate band (RNRB) for inheritance tax will remain the same until April 202610.
The current rate for inheritance tax on your estate (which include money, property and possessions) is £325,00011.
The residence nil rate band (RNRB) applies when your home is inherited by your children or grandchildren and currently stands at £175,000 per person12.
If you would like help with making your wealth work for you, talk to us. We can advise you on how to stay savvy around tax-efficient saving, managing your pension and planning for your retirement.
Book an appointment with your Adviser now.
- https://hsfnotes.com/pensions/2023/03/15/government-abolishes-lifetime-allowance/
- https://www.gov.uk/government/publications/abolition-of-lifetime-allowance-and-increases-to-pension-tax-limits/pension-tax-limits
- https://www.thetimes.co.uk/money-mentor/article/guide-capital-gains-tax/
- https://www.ftadviser.com/property/2022/11/17/dividend-and-capital-gains-tax-allowances-cut/#:~:text=The%20annual%20exemption,from%20April%202024
- https://www.gov.uk/government/publications/reduction-of-the-dividend-allowance/income-tax-reducing-the-dividend-allowance
- https://www.gov.uk/lifetime-isa#:~:text=The%20Lifetime%20ISA%20limit%20of,or%20earn%20the%2025%25%20bonus.
- https://www.gov.uk/junior-individual-savings-accounts
- https://www.bbc.co.uk/news/explainers-63635185
- https://www.hl.co.uk/news/articles/archive/pension-budget-announcements-is-no-news-good-news
- https://www.gov.uk/government/publications/lowering-of-the-additional-rate-threshold/income-tax-additional-rate-threshold-from-6-april-2023
- https://www.stapletonsaccountants.co.uk/news-blog/blog/inheritance-tax-planning/
- https://www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds-and-interest-rates/inheritance-tax-thresholds-and-interest-rates
What matters to you, matters to us
Lloyd & Whyte (Financial Services) Ltd are authorised and regulated by the Financial Conduct Authority. Please note that investments in a Stocks & Shares ISA are not guaranteed and can fall in value as well as rise. Ultimately you could get back less than you invest. It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Registered in England No. 02092560. Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA.
