5 quick tax wins you should investigate before 5 April27/02/2023
With the end of the fiscal year approaching on 5 April, now is the right time to review your tax status and take advantage of any possible reliefs and allowances. You may believe there is no such thing as a “quick tax win”. However, there are a few simple steps you can take now that might reduce your liabilities:
Inheritance Tax (IHT)
Each tax year individuals are permitted to give away up to £3,000 worth of assets or cash without it being included in their estate should they pass away within 7 years. If you have an unused yearly exemption, you can carry it over to the following tax year.
Personal Allowance (PA)
Each person is entitled to their own personal allowance (PA), which is set at £12,570 for the fiscal year 2022/23. A portion of the PA might be split between spouses and civil partners. The Marriage Allowance of £1,260 can be transferred only if neither spouse/civil partner pays higher-rate tax.
Allowances for Capital Gains Tax
When you sell or dispose of an asset, you must pay Capital Gains Tax (CGT) on any profit you have made. However, the Capital Gains Tax Exemption allows UK citizens to make a specific amount of gains each tax year without being taxed. The exemption for 2022/23 is £12,300, but it will drop to £6,000 in 2023/24 before dropping to £3,000 in 2024/25. You should use your CGT Exemption before the end of the tax year and schedule disposals to capitalise on the present higher exemption.
Individual Savings Accounts (ISAs)
You do not pay Income Tax on the interest or dividends you get from an ISA, and any returns you get on your investments are not subject to Capital Gains Tax. You can put a maximum £20,000 allocation (for 2022/23) into ISAs that include equities (stocks and shares), cash, or a combination of the two.
Annual Pension Allowance
Making full use of your yearly pension allowance is a critical method to ensure you are not paying more tax than you need to. The existing limit permit means that the majority of people can invest up to £40,000 per year into their pension, before tax. You can also utilise any unused allowance from the previous 3 years.
Investigating these allowances will give you the opportunity to save yourself, and your business, money. There is no need to pay more tax than you have to. If you want help with any of the above, call JW Hinks on 0121 456 0190 and speak to our friendly and professional tax team.