We’re now firmly in the last quarter of the 2022/23 financial year, which can only mean one thing… it’s time to make sure that you’ve used all of the tax allowances available to you!
As your trusted accountant, we want to make sure that you don’t pay any more taxes than you have to. Small savings add up when it comes to tax allowances and reliefs, so we wanted to make sure that you’re aware of all the ways that you can save on tax before the 2022/23 year-end.
Personal allowances and reliefs:
We all know that the personal allowance for income tax is £12,570, and that income above this is taxed at a tiered rate between 20% and 45%. However, if your spouse doesn’t use all of their allowance, they can transfer £1,260 of it to your personal allowance, under the marriage allowance. This will deduct a maximum of £252 from your income tax. If you or your spouse is a stay-at-home parent and isn’t currently working, the marriage allowance is certainly worth using to save on your annual tax bill.
Similarly, there is Blind Person’s Allowance, which can be claimed on top of personal allowance by people who are blind or visually impaired. For the 2022/23 tax year, the allowance is £2,600, which would deduct a maximum of £520 from your annual taxes. If your spouse or civil partner is eligible for the allowance, but doesn’t use it all, any unused allowance can be transferred to you.
The annual pensions allowance is a handy allowance to be aware of, as you can claim a 20-25% tax relief on it! The personal tax relief applies on pension contributions, which has an annual allowance of £40,000 or 100% of your salary (whichever is lowest). If you are part of a pension scheme, in which your pension contributions are deducted by your employer, and you also pay the basic rate of tax, then the tax relief should be applied automatically. If you handle your personal contributions yourself, then you will need to claim the tax relief through your Self Assessment return. Make the most of your remaining pension allowance before year-end if you can.
Individual Savings Accounts are the best way to save money tax-free, so if you can, it’s a good idea to make sure you’ve used your complete savings allowance. Each individual has an allowance of £20,000 that they can save across all of their ISAs. There are four types of ISA: cash, stocks and shares, innovative finance, and lifetime. You are allowed one of each type of ISA, and you can put money into each of them every year. Within this, the Lifetime ISA has a limited annual allowance of £4,000. Under-18s (or a guardian on their behalf) can save up to £9,000 per year in a Junior ISA. If you are in a position to do so, it’s a good idea to use as much of the ISA allowance as you can before the 6th of April, because any remaining allowance will not roll over to the next tax year.
Capital Gains Tax
The annual exemption for Capital Gains Tax is currently £12,300, which means that you do not need to pay tax on profits from sales up to this value. However, from April 2023, the capital gains allowance is being reduced to £6,000 and then to £3,000 in April 2024. With this in mind, if you are looking to sell something which you’re expecting a hefty profit from (for example a property other than your home), then it would be a good idea to sell it before the allowance is halved! The tax rates that are applied after the allowance will remain the same and are different depending on your taxpayer status:
- Basic -rate taxpayer
- 18% tax rate for property sales
- 10% tax rate for other asset sales
- Higher-rate taxpayer
- 28% for property sales
- 20% for other asset sales.
As we approach the beginning of the 2023/24 tax year, the EKWilliams team wants to help make sure that you’ve accessed all of the tax allowances and reliefs that you’re eligible for. If you would like further advice, please do not hesitate to get in touch with Chris Barlow:
+44 (0) 1 942 816 512For more tax advice and updates, check out our blog!