Planning for the New Tax Year

We’re now all settled into the New Tax year and the usual allowances have been re-set – with a few post Budget amendments. Before we remind you of those, there is one opportunity that is especially time-sensitive and could be very important for your long-term planning.

STATE PENSION ENTITLEMENT

If you do not already qualify for the full State Pension, you have until the 31st July to boost your entitlement by buying extra National Insurance years. We can’t actually do this for you, but it’s definitely worth having a look at your own NI record to see if there is some capacity.

The first stage is to look here www.gov.uk/check-state-pension and see if there are any gaps in your NI record – we recommend getting in touch asap if you are intending to explore this further as getting hold of HMRC has proved to be time-consuming and so this shouldn’t be left to the last minute.

Here is a link with some more details for you.

ISA

The new tax year also offers the opportunity to make early use of your 2023/24 allowances. Instead of leaving it to the last minute, investing your cash at the beginning of the tax year can make a lot of sense.  Whether you have a lump sum to invest, or you want to start making regular contributions, now is a good time to get in touch.

To remind you, these are the current allowances you can use up:-

Individually, you can invest up to £20,000 into your ISA account each year, with all proceeds being free of income and capital gains tax. For a married couple, that is £40,000 that can be invested in a tax-free environment each tax year.

JUNIOR ISA (JISA)

The Junior Stocks and Shares ISA limit is £9,000 per tax year. If you have a child who is 16 or 17, there is a quirk that means not only do they have the £9,000 JISA allowance, but they can also use the £20,000 cash ISA allowance. So that’s up to £29,000 a year that can be put away over two tax years.

LIFETIME ISA (LISA)

Provided you are over 18 and under 40, you are able to use a LISA to help buy your first home (subject to LISA eligibility criteria), or to fund your retirement. You can pay up to £4,000 per tax year (this forms part of the overall £20,000 ISA allowance) until you are 50, and the Government will add a bonus of 25% per tax year too – up to £1,000 per tax year.

PENSION ANNUAL ALLOWANCE

The changes from the Budget are now in force and you can now contribute up to £60,000 per tax year (or up to 100% of your earnings, whichever is lower) and receive income tax relief at your highest marginal rate. The amount you can contribute begins to become restricted for anyone earning over £260,000 and could be as low as £10,000. These changes may mean that you have more capacity than last year to fund your pension.  If you have been limited to £4,000 in your work pension, make sure you speak with the relevant people to get that increased if appropriate.

You can also invest into a pension for a non-working or non-tax-paying spouse or civil partner. Similarly, you can pay into a pension for children under 18. The maximum annual contribution you can currently make is £2,880 which, along with tax relief, amounts to £3,600 a year.

WHY INVEST EARLY?

Whilst the Budget increased some allowances, it also halved others such as the CGT allowance and the dividend allowance.  Using the available allowances as early as possible in the year can minimise tax, enable you to benefit from compound growth, and give you the opportunity to enjoy tax-free growth on your investments for a longer period.

AS AN ASIDE…

Your Platform Tax Vouchers (for the 2022/23 Self-Assessment Year) are in the process of being issued and can be found within your latest online statement.  We will be sending a separate note on this so please keep an eye out.

As always, we will continue to speak with you about these opportunities throughout the year, but if you want to get ahead of the game, please do get in touch now.

 

 

 

 

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