This has been a tax year like few others, with no fewer than four Chancellors of the Exchequer passing through the revolving doors of 11 Downing Street in the past 12 months – bringing with them a tsunami of Budgets, financial statements and ‘fiscal events’.
So with the end of the tax year just weeks away, now is a good time to think about what you need to do to make sure you are taking advantage of all of the various allowances which are available – and not falling foul of tax traps resulting from rising tax rates and falling allowances.
For companies, one of the biggest changes (taking effect on 1st April) is a hike in corporation tax from 19% to 25% for all companies with profits of more than £250,000. Only the very smallest companies will remain paying 19% (those with profits under £50,000), whilst the effective rate for profits between £50,000 and £250,000 will in fact be 26.5%. This may mean careful planning, especially around the timing of taking income and decisions on expenditure.
In addition to all of that, the ‘Super Deduction’, under which companies can offset 130% of qualifying capital expenditure, disappears on 31st March.
For company owners and other shareholders who receive dividends, there is a Dividend Allowance in the current tax year, which means the first £2,000 of any dividend income is free of tax even if you have already used up your personal allowance – whether you are a basic, higher or additional rate taxpayer. This is halved for the tax year 2023/24, and will be halved again to just £500 in 2024/25.
Also announced in Jeremy Hunt’s Autumn Statement was the reduction by more than half in the annual capital gains tax allowance from 6th April, from £12,300 to £6,000 (it will fall again to £3,000 in 2024). For those planning to dispose of assets such as second homes, rental properties and shares, timing is key – the annual allowance cannot be carried over from one tax year to the next, so if you haven’t used it by 5th April, you will lose it.
Other ‘use-them-or-lose-them’ allowances include the pension contributions allowances, which broadly permit you to contribute up to £40,000 a year into your pension and benefit from tax relief (provided your contributions don’t exceed your total income). Likewise, everyone can invest up to £20,000 into ISAs each tax year, so if you haven’t yet used up that allowance, you only have a few weeks.
Finally, Christmas may be over, but you can give away a total of £3,000 in gifts in any one tax year without affecting any future inheritance tax liability. Staggering such gifts across two tax years effectively doubles the allowance.
Our Year End Tax Planning Guide is available here:
