Financial focus on planning ahead

As we reach the end of another tax year, here are a few tips that might save you some tax (“Married Couples” include civil partnerships):

Dividend and Interest Allowances – Dividend allowance is £1,000 per person for 2023/24 but will drop to only £500 per person for 2024/25.  Interest allowance is unchanged at £1,000 for basic rate taxpayers and £500 for those at 40%.  If a married couple can transfer capital or stocks and shares, they can make best use of these allowances.  Spousal transfers are tax exempt but watch out for settlement legislation if the shares are of a private company.  Take advice if unsure.

Annual Inheritance Tax (IHT) Gift Exemption – Still unchanged at £3,000pa, but you can also carry unused allowance forward for one year (only).  A married couple could gift £12,000 before 6 April and another £6,000 days into the 2024/25 tax year if the 2022/23 allowances are unused.  This £18,000 gift allowance could save your beneficiaries £7,200 IHT.  The gifts do not have to be cash but watch for Capital Gains Tax if they aren’t. (The excess in value above available gift allowances becomes a Potentially Exempt Transfer – the old “survive 7 years” rule)

Gift Aid – low income  – Gift aid works by transferring income on which you have paid tax to your chosen charity.  The charity (being exempt from tax) reclaims the basic rate income tax you are deemed to have suffered.  If you have not paid enough tax in the year, HMRC will chase you for the balance.  The solution:- wait until the end of the tax year, calculate your tax exposure and then make a gift aid donation.  Gift Aid can be set back one year to be treated as if paid in the preceding year.  Watch for time limits but this way you can tailor your donations exactly (or just tell the charity that you are not a taxpayer).

Gift Aid – high income – Gift Aid also saves higher rate tax too (as well as helping preserve your tax allowance if your gross income exceeds £100,000).  If your income fluctuates, you can use the same method of setting back donations to maximise higher rate relief.  Check with your accountant how to do this.  

Capital Gains allowance – Now only £6,000 for 2023/24 and reducing to £3,000 per person for 2024/25.  Again, transfers between spouses / civil partners are exempt from tax so forward planning may enable you to make use of both allowances.  Specialist advice should be used if unsure.

Hope these help.

“Specialist advice should always be sought prior to taking any action on matters discussed in this article.”