Remember – it’s the last few weeks of the tax year

As the end of the tax year approaches, a prime consideration should be how external factors such as reduced or frozen allowances, coupled with inflation, could impact your finances and what action you should consider taking before 5 April 2023.

Individual Savings Account (ISA)

If you are affected by the impending changes to Dividend Tax or Capital Gains Tax (CGT) announced in the Autumn Statement, have you considered investing up to £20,000 this tax year in a stocks and shares ISA?

From April 2023, the Dividend Allowance will be cut from £2,000 to £1,000 and then fall further to £500 from April 2024. In addition, the annual CGT exemption will fall from £12,300 to £6,000 in April and then to £3,000 the following year. Dividends received on shares within an ISA are tax free and won’t impact your Dividend Allowance. Also, any profit you make when selling investments in your stocks and shares ISA is free of CGT.

Junior ISAs are a tax-efficient way to build up savings for children and grandchildren (maximum investment is £9,000 per child).

Don’t forget your pension

Both the Annual Allowance and Lifetime Allowance are frozen until 2028, at £40,000 and £1,073,100 respectively. As these allowances haven’t increased with inflation, it effectively means those saving to the maximum extent possible with tax concessions can save less in real terms each year.

Making gifts for Inheritance Tax (IHT)

The sums you can gift for IHT purposes are small, but you should use these exemptions where possible (gifts worth up to £3,000 in each tax year are exempt from IHT on death). Certain gifts don’t use up this annual exemption but incur no IHT. 

We can’t stress enough the importance of tax year end planning. It is vital to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and to prepare for the changes that come in over the next few years. With plenty to consider and factor into your financial plan, valuable financial advice remains central to achieving your goals and aspirations.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.