Here are some pointers to help you to consider opportunities. Unless otherwise stated, the rates refer to the tax year 2022-2023.
Income Tax – The Personal Allowance is £12,570 (it is reduced by £1 for every £2 of ‘adjusted income’ above £100,000)
(*) Consider transferring income yielding assets to a spouse or civil partner to maximise your allowances (caveat: ownership changes!).
(*) Remember the Marriage Allowance (£1,260) is transferable to a spouse or civil partner who is not a higher or additional rate taxpayer.
Capital Gains Tax – The Annual Exemption is £12,300
(*) Are you taking advantage of this tax-free annual exemption – where appropriate to your financial planning, of course. The exemption cannot be carried forward.
(*) Married couples and civil partners can consider transferring assets to the other at a no gain and no loss basis to ensure the respective annual exemptions are fully used (remember … ownership changes!).
Main Residence – Principal Private Residence election
(*) If you own more than one home, consider whether a principal private residence election is needed. You have two years to make an election after acquiring a second (or subsequent) residence.
Tax Favoured Investments – Prudent utilisation of the reliefs can bring benefits
(*) Tax favoured investments as part of a balanced portfolio can make a difference to future investment returns, but it is important to consider the risks associated with them and it is essential that professional advice is sought. The list to check out includes Individual Savings Accounts (annual limit £20,000 per individual), Enterprise Investment Schemes, Seed EIS Shares, and Venture Capital Trusts.
Inheritance Tax (IHT) – There are possibilities to reduce the impact
(*) The Nil Rate, i.e. tax-free, Band remains frozen at £325,000 and house values have risen. So have you checked your potential IHT position in that context?
(*) Seek advice on IHT planning during your lifetime in order to use available exemptions and reliefs where appropriate.
Pensions – Check the thresholds
(*) If the total of all your pension funds is likely to be at or near £1,073,100 by the time you retire, you should seek immediate advice
(*) The annual allowance for pension contributions is the higher of earnings (capped at £40,000) or £3,600. Are your current pension inputs at the appropriate level for your future income needs?
Cash Reserves – Check your cash reserves before you need to call on them
(*)Take this opportunity to check that your cash reserves are at an appropriate level to meet all contingencies over the short, medium, and longer term – and that they will be available within timescales appropriate to each contingency.
We have set out above what is only a brief summary of some key points that involve quite complex considerations. Always seek relevant professional advice before taking, or refraining from taking, any action.
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