By Alexander Bari
Personal tax planning before the end of the tax year is important to ensure you make the most of tax reliefs and allowances.
Despite there not being many changes to tax rates and reliefs in the Autumn Statement 2023, there are still opportunities to save tax by wisely using tax reliefs and allowances. So, working with your accountant on year end tax planning could save you significant amounts of tax and allow you to keep more of your hard earned money.
This blog offers advice on just some of the opportunities you could consider. It contains ideas affecting income and investments.
Income tax saving opportunities
Personal allowance
Everyone should make sure they use their tax free allowances. The personal tax allowance allows you to earn £12,570 tax free in 2023/24, and this allowance is frozen at this level until 2027/28.
For couples, if either spouse or a civil partner will not be able to use their personal allowance for 2023/24, then claiming the marriage allowance will save the other spouse or civil partner up to £252 in tax. However, a claim can only be made if the recipient does not pay tax above the basic rate
Income
The personal allowance is withdrawn where income (less certain deductions) is more than £100,000.
Income over £125,140 is currently taxed at 45%, or 47% for non-savings, non-dividend income in Scotland.
Bringing forward income could be a sensible approach if you are not currently an additional rate taxpayer but expect to become one next year.
If your income is less than £100,000 this year but is expected to exceed that figure next year, you could bring forward income into 2023/24 to avoid the additional or top rate next year.
Conversely, if your income will fall below £100,000 in 2024/25, you might be able to avoid the additional or top rate of income tax this year by delaying a bonus until after 6 April 2024.
You might be able to reorganise both your financial affairs to avoid exceeding one of these limits. However, capital gains tax (CGT) may be payable on switching ownership of an investment if you are not married or in a civil partnership.
The director/employee tax planning approach around income levels applies equally to people who are self-employed. If you are self-employed, you might be able to affect the timing of your taxable profits to avoid paying tax at 45% (47% in Scotland), but this will depend on your accounting date.
