Pensions
Personal pension contributions up to your available annual allowance made to pension schemes attract relief at your marginal rate of tax. Obtaining tax relief on the contribution, coupled with the future tax-free growth within the fund and the ability to take a tax-free lump sum, means pension contributions are often appealing to our clients.
Now that the tax year end is approaching, I recommend that people assess their level of income to establish if they are at risk of losing their personal allowance and whether they wish to make contributions to reinstate their personal allowance.
There are restrictions around the level of contributions that can be made based on your income and available brought-forward annual allowances. Consideration should also be given to the available annual allowances when making contributions. We would always recommend that an Independent Financial Advisor be appointed to assist with any queries.
If you are approaching retirement and are considering drawing benefits, advice should also be sought to understand all the relevant implications and options when accessing the pension fund.
Company dividends
An additional option to consider this year is company dividends.
The tax-free dividend allowance is dropping to £500 for dividends paid after 6 April 2024, from £1,000 previously, so it is important to bear this in mind this year when considering the level of dividends to pay.
ISA Investments
Individual Savings Accounts (ISAs) are still an attractive investment vehicle for many clients. People should consider whether there is an appetite to use their investment limit of £20,000 for the 2023/24 tax year.
Jeremy Hunt recently announced plans to launch a new UK ISA to encourage investment in UK businesses. The design and implementation are under consultation until 6 June 2024, requiring a government response, and new legislation must be introduced. Considering these factors, some financial institution representatives believe it is unlikely the UK ISA will be available before 6 April 2025.
Gift Aid
If a charitable donation is made with gift aid being claimed, the charity can claim an additional 25% of the donation (i.e., can claim an extra 25p for every £1 you give). Higher rate taxpayers can then claim a deduction in their tax liability of around 25% of the amount paid, with additional rate taxpayers being able to claim around 31.25% of the donation paid.
It should be noted the donor should ensure that they have paid sufficient tax during the tax year to cover the charities reclaim from HMRC; otherwise, a charge may arise on the tax return.
Capital Gains Tax
With the reduction of the capital gains annual allowance from £6,000 to £3,000 from 6 April 2024, some thought should be made around whether assets should be sold or transferred before the end of the tax year to ensure these allowances are used, and a capital gains tax charge is potentially avoided.
Also, note the Chancellor’s recent Budget Announcement that the higher rate of capital gains tax on the disposal of residential properties has been reduced from 28% to 24% from 6 April 2024.
Inheritance tax
Thought should be given around using any available allowances, such as the annual exemption of £3,000 (and a brought forward allowance if applicable) as well as the small gift allowance of £250.
However, I am a firm believer that inheritance tax planning should not only be considered at the end of the tax year but should be considered on an ongoing basis with relevant action taken when applicable.
Finally, as a reminder…
State Pension Top-ups (deadline extended from 5 April 2024 to 5 April 2025)
People are considering National Insurance top-ups to increase their State Pension. Following the introduction of the new State Pension in April 2016, many people will require thirty-five full qualifying National Insurance years to obtain a full State Pension. There is an opportunity for individuals to review the gaps in their National Insurance records for the 2006 to 2016 tax years and top up contributions voluntarily. However, to make the most of this opportunity, payments covering this period have to be made by 5 April 2025.
This deadline has been extended in previous years due to delays with the Department of Work and Pensions, and it is thought that this will be a hard deadline this time.
For further advice on all tax matters or for expert help with your tax, contact Bevan Buckland on 01792 410100
