ARE THESE TAX CHANGES ON YOUR RADAR?

15 March 2023

ARE THESE TAX CHANGES ON YOUR RADAR?

Important planning actions ahead of 5 April 2023

From plugging gaps in your National Insurance (NI) record to managing the increased Corporation Tax rate, quite frankly, there’s a lot of taxation change for business owners and individuals to keep on top of.

With the end of another tax year fast approaching, we’re sharing other areas to consider as part of your tax planning prep and how you can protect your finances moving forward.

 

CAPITAL GAINS TAX ANNUAL EXEMPT AMOUNT (AEA)

Use it or lose it!

In the UK, most individuals are entitled to a tax-free allowance (otherwise known as the annual exempt amount) and can therefore make capital gains up to £12,300 before paying any Capital Gains Tax (CGT).

As announced in the 2022 Autumn Statement, the annual exempt amount will be reduced by more than 50% from £12,300 to £6,000, starting from the 6 April 2023.

This will then be followed by a further reduction to £3,000 for all subsequent tax years.

How it could affect you

The consequences are that more people could be liable for paying CGT and there’ll be an increase in the amount of CGT due on any disposals.

If you have any capital assets you’re thinking of disposing of, you may want to consider the timing of this to utilise the higher tax-free allowance (AEA).

 

DIVIDEND ALLOWANCE TO BE REDUCED

…again, use it or lose it! 

Individuals can currently receive dividends up to £2,000 in total with no tax payable.

From 6 April 2023, this tax-free allowance will be reduced from £2,000 to £1,000.

From 6 April 2024, it’ll be further reduced to £500.

Dividends still offer some of the lowest tax rates for individuals with the rates remaining lower than employment income.

However, this reduced allowance effective from 6 April 2023 will lead to an increase in the tax due for individuals with dividend income. This could also lead to an increase in the number of people having to complete self-assessment tax returns.

So, what do you need to do?

In the lead up to 6 April, you should make sure you’re taking advantage of all personal tax allowances and exemptions, particularly how to mitigate dividend tax on your investments. You could for instance invest in your ISA. ISA investments are also free from income tax and Capital Gains Tax (CGT), making them a tax-efficient way of saving and investing.

Other opportunities include making pension contributions, restructuring your portfolio, and/or, if you’re married or in a civil partnership, making investments as a couple to reduce your dividend tax bill.

BURNING QUESTIONS ABOUT YEAR-END TAX PLANNING?

To discuss the implications for your own circumstances, our dedicated Tax team will be more than happy to help. Drop them an email.

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