As we enter March, we are all hoping it will soon be time to say goodbye to dark mornings and icy windscreens! But something we will also be saying goodbye to is the 2022/23 tax year, as 2023/24 rapidly approaches on 6th April.
So, with 2022/23 on it’s way out, it is time to take a look at whether you have utilised all of the 22/23 allowances available to you because, for the most part, once the year has gone, so have the allowances!
Dividend allowance
In the 22/23 tax year, there is a tax free dividend allowance of £2,000. This is irrespective of any other personal income that you may have in the tax year, so if you haven’t already withdrawn your tax free dividends, and if your company has the profit available, now is the time to do so.
Any dividends over the tax free £2,000 (but still within the basic rate tax band) will be taxed at 8.75%, so it is also advisable that, company profit dependant, you also take advantage of this low rate of tax by withdrawing dividends within the basic rate band.
This tax free allowance is due to be cut down to £1,000 in the 23/24 tax year.
Capital Gains Allowance
Any investment or funds including properties that aren’t your main residence are subject to this tax on disposal, and each year you receive a tax free allowance for such income. For 22/23 this is £12,300 which can be used on gains before any tax is paid. The tax payable can be as high as 28% of the gain, and you are unable to carry over any allowance, so it is important that you plan the disposal of any assets taking this into account.
This tax free allowance is due to be cut down to £6,000 in the 23/24 tax year.
ISA allowance
If you have a large amount of savings attracting a large amount of interest (over £1,000 for basic rate tax payers, or over £500 for higher rate tax payers), then it may be worth investing in a ISA.
Any interest received within these thresholds will be tax free, but, if you do receive interest in excess of these amounts, then it may be worth investing and making use of your ISA allowance for the year, which for 22/23 is £20,000. This allowance can be split between the various types of ISAs, cash ISAs, stocks and shares ISAs, Lifetime ISAs etc.
Another thing to bear in mind with the Lifetime ISA is that this has its own separate rule as to how much you can pay in per year which is £4,000.
Pension allowance
Each year, each UK tax payer an allowance of up to £40,000 (or possibly more if in the last 3 years you didn’t fully utilise your annual allowance) that can be invested into a pension.
If you pay into a pension personally, you will receive personal tax relief on this amount when you come to complete your self assessment return for the year, extending your basic rate tax band, which in turn will mean that more of your income will be taxed at the lower rate (the same goes for any charitable donations you may make in the year).
If you pay into a pension directly from your company, your company will receive corporation tax relief on the amount paid as a tax deductible business expense.
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