Each tax year, you have a set of reliefs and allowances you can take advantage of, helping make your money work harder for you. And, with some careful planning, you could potentially save thousands.
Unleashing your financial freedom
Below are some of the tax reliefs and allowances currently available to you as well as some tips on how they can be used to help you build your financial wealth – these allowances are only available until 5 April 2024 before they renew for the 2024/25 tax year.
ISAs
An Individual Savings Account or ISA is a savings plan that offers tax-free income and gains, and no tax on withdrawals. There is one for nearly every saver and today the ISA is still seen as one of the best ways to make your money go further.
The maximum savings you can hold in an ISA is £20,000 per person and you can split this between a cash ISA and a stocks and shares ISA. There are some caveats, you must be 16 or over to open a cash ISA, and 18 or over to open a stocks and shares ISA. You also need to be a UK resident within the tax year that you open your ISA.
Tip: Unfortunately you can’t carry any of your ISA allowance over into the next tax year so if you haven’t yet reached your maximum £20,000 limit it’s worth topping up before the 5 April deadline.
Other types of ISAs include
Junior ISAs
The Junior ISA or JISA can be set up by a parent or guardian for anyone under the age of 18 living in the UK. The annual limit for a JISA is £9,000.
There are two types of JISA: a cash JISA, where interest on the cash saved is tax-free; and a stocks and shares JISA, where cash is invested and there is no tax on any capital growth or dividends received.
Tip: A JISA is a more tax-efficient way of saying for your child’s future as you do not have to pay tax on any income generated, this would be different if you were gifting your children money as this would have to be declared on your tax return.
Inheritance ISAs
If sadly your spouse or civil partner has passed away while holding an ISA, you can make arrangements to take over their ISA savings without losing any of the tax benefits. This is known as an ‘Additional Permitted Subscription’ (APS).
Inheritance ISAs do not impact any of your existing ISAs meaning you still have access to £20,000 of tax-free savings.
Tip: Any Inheritance ISA allowance must be used within three years of the date of death, or 180 days from the completion of the administration of the estate. If you have cash of your own, you don’t have to wait for probate.
This allowance can be more tricky to navigate so please do get in touch if you need any support.
Other tax efficient saving opportunities
The Personal Savings Allowance (PSA)
Since the 6 April 2016, the first £1,000 of interest earned on your savings is tax-free for basic rate taxpayers (£500 for higher rate taxpayers).
This means that any interest you earn from bank accounts, savings accounts, credit union accounts, building societies, corporate bonds, government bonds and gifts is covered including interest earned on other currencies held in UK based savings accounts.
If you are a basic rate taxpayer the Personal Savings Allowance could really benefit you. Say you have £25,000 of savings in your account, each year, this will grow in line with interest rates and you will not have to pay any tax on the interest received.
It’s important to note however that if you are an additional rate (45%) taxpayer you do not benefit from this tax-free allowance however there are other planning opportunities to grow your wealth so please do get in touch.
Tip: You can use your Personal Savings Allowance in combination with ISAs to generate additional tax-free interest.
Dividend Allowance
Any income paid from a company you have invested in is taxed as dividend income. Rates increased by 1.25 percentage points with effect from 6 April 2022.
Four different tax rates can be applied to dividend income received from 2022/23 onwards:
- the dividend nil rate of 0%,
- the dividend ordinary rate of 8.75%,
- the dividend upper rate of 33.75%
- or the dividend additional rate of 39.35.%.
Tip: The dividend nil rate band was reduced to £1,000 for the 2023/24 tax year and will be reduced again to £500 for the 2024/25 tax year. If you hold shares in a company and are concerned about your dividend allowance, please do get in touch.
Capital Gains Tax
This year you have a Capital Gains Tax (CGT) free allowance of £6,000 on any profit you make from the sale of a capital asset, such as property or equities. This allowance will be halved in 2024/25 to just £3,000.
The rate of CGT you have to pay depends on your unused income tax bracket and the type of asset you sell. It’s important to note that residential property will trigger a higher rate of CGT.
The marginal rates of CGT for the 2023/24 tax year are as follows:
| Tax Bracket | Income range | CGT rate on assets | CGT rate on property |
| Basic rate taxpayer | £12,571 to £50,270 | 10% | 18% |
| Higher rate taxpayer | £50,271 to £125,139 | 20% | 28% |
| Additional rate taxpayer | Over £125,140 | 20% | 28% |
If you haven’t used your CGT allowance for 2023/24, are there any assets that could be sold before 5 April 2024? If you have, consider holding off on selling any other assets until the next tax year. You may also be the ability to use capital losses from this or previous tax years.
If your spouse is a basic rate taxpayer, gains realised by them may attract tax at the lower 10% CGT rate (with the exception of residential property at 18%) to the extent of the unused income tax basic rate band and they may also have unused CGT annual exemption.
Tip: If you have substantial investments, speak to an adviser to understand if it is possible to restructure these so that they produce either a tax-free return or a return of capital taxed at a maximum of only 20% under CGT, rather than income tax at up to 45%.
Connect with us today
As we approach the end of the 2023/24 tax year, if you feel you need support with your tax planning, please do get in touch, we would be delighted to help.
