UK Tax year-end: how can I make the most of my tax allowances?

It’s always a good idea to take advantage of your annual tax reliefs and allowances wherever you can. Not only does it mean that you don’t pay more tax than necessary, it also helps to improve your investment outcomes and makes it easier to achieve your financial goals. 

This year, though, it’s more important than ever. In his first Autumn Statement, Chancellor Jeremy Hunt announced reductions to a number of key allowances used by investors, as part of his attempts to shore up the nation’s finances.

The message is use them or lose them.

Here, you can find out what you need to do before the end of the UK tax year (5 April 2023) and how we can help.

What is the Capital Gains Tax allowance?

The Capital Gains Tax (CGT) allowance for the current tax year (2022/23) is £12,300. This means that when you sell your UK properties, you can enjoy gains up to £12,300 before you pay CGT.

But following the Chancellor’s announcement in the Autumn Statement, from 6 April 2023, the CGT allowance will be more than halved to £6,000, before it halves again in 2024/25 to just £3,000 a year.

The current rates for CGT 18% and 28% for residential-property sales.

How do I mitigate the Impact of recent tax changes?

There are a number of steps that investors can take to mitigate a CGT bill, including selling off assets over several tax years and taking advantage of their spouse’s allowance. 

However, with such significant reductions to the allowance looming, investors with assets to sell should check in with us and start planning ahead.

Use your allowances

This tax year, you can also pay up to £9,000 into an existing Junior ISA (JISA). A Junior ISA can be a tax-effective way of saving a lump sum for the children in your life. 

How much money can be efficiently given to a family member as a gift?

If your beneficiaries will likely pay Inheritance Tax (IHT) when you die, you may also want to think about using your gifting allowances.

Each year, you can give away £3,000 (or £6,000 between couples) free of inheritance tax.

There are also separate allowances for wedding gifts to family members, but they aren’t annual.

Use it or lose it

The majority of allowances work on an annual basis. That means if you don’t use an allowance before 5 April, you lose it.

The IHT gifting allowance is one to take note of. Carry-forward rules enable you to use any unused IHT gifting allowance from the previous year. This means a couple gifting for the first time could legally gift £12,000 tax free to their family.

The value of advice

Talk to us throughout the year – and not just at the end of the UK tax year – and we can make sure you take advantage of reliefs and allowances wherever you can.

In addition to making more of your wealth, this can also have a priceless impact on your financial wellbeing, sparing you the worry around paying too much tax or breaching rules and not paying enough. 

Tax-year-end planning shouldn’t be a rush, but with key allowances being reduced over the coming years, it might be worth checking in with us to find out if you can mitigate their impact by planning ahead now.

This article is a general communication being provided for informational purpose only. It should not be relied upon as financial advice and it does not constitute a recommendation, an offer or solicitation. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. 

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. You are advised to seek independent tax advice from suitably qualified professionals before making any decision as to the tax implications of any investment.  

SJP Approved 25/11/2022