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Personal Tax Planning 2023/24 – Expert Advice and Tax Planning Tips

Income Tax Planning 2023/24 including Capital Gains Tax

Introduction 

Navigating the UK tax system can be a challenge. However, with expert advice and practical tax planning tips, you can maximise your tax savings and minimise your tax liabilities. This guide will cover personal tax planning for the 2023/24 tax year, focusing on tax incentives, reliefs, and alloances for individuals and businesses.

If you are a company director, here is our comprehensive year end tax planning checklist.

What is personal tax planning, and why is it important? 

Personal tax planning involves organising your finances to optimise your tax position. It helps you to take advantage of available tax incentives, reliefs, and allowances, reducing your overall tax liability. Effective tax planning can save money, enhance wealth, and help you achieve your financial goals. 

What are the current tax incentives for individuals and businesses? 

Several tax incentives are available for individuals and businesses in the 2023/24 tax year, including: 

  1. Personal Savings Allowance (PSA): This allows basic-rate taxpayers to earn up to £1,000 in interest tax-free and higher-rate taxpayers to earn up to £500 tax-free. Additional-rate taxpayers do not receive a PSA. 

  1. Capital Gains Tax (CGT) Exemption: Individuals can make tax-free capital gains of up to £6,000 during the 2023/24 tax year. (This is down from £12,300 in 2022/23). 

  1. Enterprise Investment Scheme (EIS): EIS offers tax relief to investors who buy shares in small, high-risk companies. Income tax relief of 30% can be claimed on investments up to £1 million, with additional reliefs available for capital gains and inheritance tax. 

  1. Pension Contributions: Tax relief is available on pension contributions at your highest income tax rate, up to an annual allowance of £60,000. 

  1. Research & Development (R&D) Relief: This relief provides tax incentives for companies investing in research and development. It can significantly reduce a company’s corporation tax liability or even provide cash repayments. 

How can I use tax reliefs and my tax allowance to reduce my tax bill? 

To make the most of tax reliefs and allowances, you should: 

  1. Maximise your ISA allowance: The annual ISA allowance is £20,000 for the 2023/24 tax year, which can be divided across cash, stocks and shares, and innovative finance ISAs. 

  1. Utilise your pension allowance: Make the most of your pension contributions by claiming tax relief at your highest income tax rate. 

  1. Invest in tax-efficient vehicles: Consider investing in EIS, Venture Capital Trusts (VCTs), or Social Enterprises to benefit from available tax reliefs. 

  1. Transfer assets between spouses: If one spouse is in a lower tax bracket, transferring income-generating assets can reduce the tax liability for both partners. 

  1. Claim available reliefs and allowances: Make sure you claim any applicable tax reliefs and allowances, such as the personal allowance, marriage allowance, and R&D relief for businesses. 

What are some of the tax-efficient investments I can make? 

Tax-efficient investments include: 

  1. Individual Savings Accounts (ISAs): Interest, dividends, and capital gains within an ISA are tax-free. 

  1. Pensions: Pension contributions receive tax relief and grow tax-free but are subject to tax when withdrawn. 

  1. Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) offer tax reliefs for investing in small, high-risk companies. 

  1. Social Enterprises: Investing in social enterprises can provide tax relief through the Social Investment Tax Relief (SITR) scheme. 

  1. Seed Enterprise Investment Scheme (SEIS): This scheme offers tax relief for investing in early-stage start-ups.

How can I plan my retirement in a tax-efficient way?

To plan your retirement in a tax-efficient way, consider the following strategies:

  1. Contribute to a pension: Maximise your pension contributions to benefit from tax relief and tax-free growth. Ensure you stay within the annual allowance of £60,000 to avoid tax penalties.

  1. Use ISAs for additional savings: Utilise your annual ISA allowance to build a tax-free nest egg for retirement.

  1. Diversify your investments: Diversify your portfolio with a mix of tax-efficient investments such as EIS, VCTs, and social enterprises to minimise tax liabilities. 

  1. Consider phased drawdown: Phased drawdown allows you to gradually withdraw from your pension, which can help manage your tax liability in retirement. 

  1. Utilise your personal allowance: Ensure you make use of your personal allowance in retirement by drawing an income up to the tax-free threshold. 

  1. Plan for inheritance tax (IHT): Consider IHT planning to minimise the tax impact on your estate, including using IHT exemptions and reliefs. 

What are the current rules and reliefs for inheritance tax? 

Inheritance tax (IHT) is a tax on the value of an individual’s estate upon their death. The current IHT rules and reliefs include: 

  1. Nil-rate band: The first £325,000 of an individual’s estate is tax-free, known as the “nil-rate band.” 

  1. Residence nil-rate band: An additional £175,000 is available if a main residence is passed to direct descendants, bringing the total tax-free threshold to £500,000 for individuals or £1 million for married couples and civil partners. 

  1. Gifts: Gifts made more than seven years before death are exempt from IHT. Gifts made within seven years are subject to a tapering IHT rate. 

  1. Business Property Relief (BPR) and Agricultural Property Relief (APR): These reliefs can reduce or eliminate IHT on qualifying business and agricultural assets. 

  1. Charitable donations: Gifts to registered charities are exempt from IHT. Leaving at least 10% of your estate to charity can reduce your overall IHT rate. 

What are the tax implications of owning a business? 

Owning a business can have various tax implications, including: 

  1. Corporation tax: For companies with augmented profits of less than £50,000, the corporation tax rate will continue to be 19%. For companies with greater than £250,000 in augmented profits, the corporation tax rate will be 25%. For companies with augmented profits between £50,000 and £250,000 the tax due is calculated at 25% but tapered down using a marginal relief calculation. 

  1. Dividend tax: Shareholders in a company are taxed on dividends they receive, with rates depending on their income tax band. 

  1. National Insurance Contributions (NICs): Business owners must pay Class 1 NICs for their employees and Class 2 and 4 NICs if they are self-employed. 

  1. VAT: Businesses with a taxable turnover above the VAT threshold (£85,000 for the 2023/24 tax year) must register for and charge VAT on their sales. 

  1. Business rates: Owners of commercial property may be liable for business rates, a tax on the property’s rental value. 

  1. Capital gains tax (CGT): When selling or disposing of business assets, business owners may be liable for CGT on any gains. 

  1. Research & Development (R&D) Relief: Businesses investing in R&D can benefit from tax relief, reducing their corporation tax liability. 

How can I benefit from R&D relief and investment in new plant and machinery? 

To benefit from R&D relief: 

  1. Determine if your business is eligible: R&D relief is available to limited companies undertaking qualifying research and development activities. 

  1. Calculate your eligible R&D expenditure: Include costs such as staff salaries, subcontractor fees, materials, and software. 

  1. Claim the relief: Submit your claim through your Company Tax Return (CT600) or amend a previous return if you discover eligible expenditure after filing. 

  1. Maintain detailed records: Keep accurate records of your R&D activities and expenditures to support your claim. 

  1. R&D relief allows companies that carry out qualifying R&D related to their trade to claim an extra CT deduction for certain qualifying expenditure. The level of relief available depends upon which scheme the company uses. 

To benefit from investment in new plant and machinery: 

  1. Utilise the Annual Investment Allowance (AIA): The AIA allows businesses to claim 100% tax relief on qualifying plant and machinery investments up to a specified limit, which is £1 million for the 2023/24 tax year. 

  1. Claim Writing Down Allowances (WDAs): If your investment exceeds the AIA limit or does not qualify for AIA, you can claim WDAs, which provide tax relief on a percentage of the investment cost over several years. 

  1. Consider Enhanced Capital Allowances (ECAs): ECAs are available for energy-saving and water-efficient equipment, providing 100% first-year tax relief. 

  1. Keep accurate records: Maintain detailed records of your investments in plant and machinery to support your tax relief claims. 

How can I reduce my capital gains tax liability? 

To reduce your capital gains tax (CGT) liability: 

  1. Utilise your annual exemption: Use your annual CGT exemption, which is £6,000 for the 2023/24 tax year. 

  1. Offset capital losses: If you have made capital losses in the same tax year or previous years, you can offset them against your gains to reduce your CGT liability. 

  1. Transfer assets to a spouse: Transferring assets to a spouse or civil partner who has a lower tax rate or unused CGT exemption can reduce your overall CGT liability. 

  1. Hold assets for the long term: Holding assets for more than 12 months may qualify you for a reduced CGT rate through Business Asset Disposal Relief (BADR) or Investors’ Relief (both reliefs only apply if you are a trading company).  

  1. Invest in tax-efficient vehicles: Consider investing in EIS, SEIS, or VCTs, which offer CGT deferral or exemptions.  

What is the fiscal drag, and how does it affect my tax bill? 

Fiscal drag occurs when tax allowances, bands, and thresholds do not keep pace with inflation. This can result in more people being pushed into higher tax brackets or losing tax reliefs, even if their real income has stayed the same. To counteract the effects of fiscal drag, it is essential to keep abreast of changes in tax rates and bands and adjust your financial planning accordingly. 

What are some key changes and freezes to tax rates and bands that I should be aware of? 

For the 2023/24 tax year, some key changes and freezes to tax rates and bands include: 

  1. Personal allowance and higher-rate threshold freeze: The personal allowance remains at £12,570, and the higher-rate threshold is frozen at £50,270 until 2026 (subject to review every year).  

  1. Capital Gains Tax annual exemption: The CGT annual exemption changes to £6000. However, this will decrease to £3000 in April 2024.  

  1. Inheritance tax nil-rate band and residence nil-rate band freeze: Both the IHT nil-rate band (£325,000) and the residence nil-rate band (£175,000) are frozen until 2028.  

  1. Pensions lifetime allowance freeze: The lifetime allowance for pension savings remains at £1,073,100 until 2028.  

Can Jack Ross give me my personal tax planning advice? 

Jack Ross, a leading independt accountancy, and advisory firm can provide expert assistance with your personal tax planning needs. Their services include: 

  1. Tax advice and compliance: Jack Ross can help you understand your tax obligations and ensure your tax returns are accurate and compliant. 

  1. Tax-efficient planning: Jack Ross can advise on tax-efficient investment strategies, pensions, and estate planning strategies. 

  1. International tax planning: Jack Ross can provide expert guidance on international tax issues for individuals with cross-border tax considerations. 

  1. Inheritance tax planning: Jack Ross can help you navigate the complex rules surrounding inheritance tax and develop a tailored plan to minimise your estate’s tax liability. 

  1. Business tax planning: If you are a business owner, Jack Ross can assist with tax-efficient strategies for your business, including R&D relief, capital allowances, and corporation tax planning. 

  1. Tax dispute resolution: Jack Ross can provide expert advice and representation if you face a tax dispute with HMRC or other tax authorities. 

By engaging with Jack Ross’s experienced tax advisors, you can optimise your personal tax planning to take full advantage of available allowances, reliefs, and incentives while staying compliant with tax laws and regulations. 

Use Jack Ross for year end tax planning

In conclusion, personal tax planning is crucial for individuals and businesses to minimise their tax liabilities and maximise the benefits of available tax incentives, reliefs, and allowances. By staying informed about the latest tax rules and regulations and seeking expert advice, you can make tax-efficient decisions and optimise your financial planning for the 2023/24 tax year and beyond. 

Looking to maximise your tax savings and minimise your tax liabilities for the 2023/24 tax year? Look no further than Jack Ross, the leading independent accountancy and advisory firm.

Our expert tax advisors can provide you with personalised advice and practical tax planning tips to optimise your tax position. Whether you’re an individual or a business owner, we can help you take advantage of available tax incentives, reliefs, and allowances to reduce your overall tax liability, enhance your wealth, and achieve your financial goals.

Our comprehensive range of tax services includes tax advice and compliance, tax-efficient planning, international tax planning, inheritance tax planning, business tax planning, and tax dispute resolution. By engaging with our experienced tax advisors, you can make informed tax-efficient decisions, stay compliant with tax laws and regulations, and optimise your financial planning for the 2023/24 tax year and beyond.

Don’t let fiscal drag push you into higher tax brackets or lose tax reliefs. Contact Jack Ross for year-end tax planning and maximise your tax savings today. Call us now on 0161 832 4451 or complete the web form below, and we will be in touch to help you save tax.

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