Moving the Tax Return goalposts

Now that we have turned the corner into another tax year, post 6 April 2023, there are several allowances and thresholds that have been changed that may have an impact on your personal affairs and tax planning for the coming year.

Firstly, for those individuals that receive dividend income, from 6^th April 2023 the nil rate band has reduced to £1,000 and is set to reduce again to £500 for 2023/24 onwards. Meaning less of your dividend income each year will be tax free. The tax rates applicable to dividends over this limit will remain the same for 2023/24, as in the 2022/23 year, at 8.75% to the extent your income falls within your basic rate tax band, 33.75% in the higher rate band, and 39.35% in the additional rate band.

The reduction in the nil rate band for dividends will also result in more individuals falling into the requirement to file self-assessment Tax Returns. If your dividend income was previously covered by the nil rate band, then after the reduction now exceeds it, you may be required to file an annual self-assessment Tax Return to report this, depending on your circumstances.

Secondly, the Capital Gains Tax (CGT) annual allowance has reduced to £6,000 from 6 April 2023, and will reduce further to £3,000 in 2024/25. The annual allowance is deducted from the capital gains made in a tax year, and any gains in excess of this are taxed at the CGT rates which remain unchanged from the 2022/23 rates.  Given the reduced allowances, it is possible that more capital disposals are likely to give rise to the need for self-assessment Tax Returns or 60-day (CGT) reports to be submitted to HMRC.

When you dispose of a UK residential property, unless there is no CGT liability, you must report the property Gain and pay the CGT due to HMRC online, within 60 days of completion. 

At the point that you then complete your annual Self-Assessment Return, you are required to include the disposal details again and calculate your final CGT exposure, including any losses in the tax year post completion date. If there is a difference between the final amount of CGT due and paid already, you will have to pay this balance alongside your income tax liability.

Lastly, HMRC are increasing the threshold at which point it becomes compulsory to file a self-assessment Tax Return for the 2023/24 tax year. This is currently a compulsory requirement for anyone with total gross income of over £100,000 in 2022/23, including PAYE sources. This will be increasing to £150,000 for 2023/24 onwards, although it is still always worth reviewing your affairs if your gross income exceeds £100,000, due to the potential effect of the loss of personal tax allowances.