Are you ready to maximise your tax-free allowances before the fiscal year concludes on 5 April? Grasping your options now could lead to substantial tax savings. Let's explore some key strategies to utilise your allowances with a UK focus.
Personal and Dividend Allowances
Initially, you are entitled to a personal allowance of up to £12,570, which is tax-free. This is a foundational element of your tax planning. Additionally, there's a £1,000 allowance for dividend income, granted it hasn't been consumed by your personal allowance. These allowances are pivotal in your tax-saving arsenal.
Savings and Capital Gains
The HMRC offers a personal savings allowance; basic rate taxpayers benefit from £1,000, and higher rate taxpayers from £500, free from tax. For capital gains, you have up to £6,000 tax-free this fiscal year, but note, this lowers to £3,000 starting April 2024.
ISAs: A Savvy Choice
Individual Savings Accounts (ISAs) allow you or your children to save or invest up to £20,000 annually, with all returns within these ISAs being tax-free, per HMRC guidelines. Junior ISAs offer a formidable £9,000 a year contribution limit for children under 18.
Pension Contributions
Contributions to pensions represent a critical method to decrease your tax liability. HMRC allows you to contribute up to £60,000 annually, enhancing your pension through tax relief. For higher income earners, pension contributions can significantly impact your "adjusted net income," potentially navigating around the High Income Child Benefit Tax Charge or diminishing your taxable income.
Salary Sacrifice: A Consideration
Approaching a higher tax bracket? It's worth discussing salary sacrifice schemes with your employer. This not only reduces both your income tax and National Insurance contributions but also amplifies the tax efficiency of pension savings. This strategy is particularly beneficial for those near the higher tax thresholds.
Leveraging these tax-free allowances and approaches can markedly lessen your tax burden. With the fiscal year-end rapidly approaching, now's the time for action. For bespoke advice, consider consulting with a financial advisor, who can offer guidance tailored to your specific situation.
Continue to follow Everest and Co Accountants' website for further financial insights and strategies, or get in touch with us at 0190221980. Let's navigate the complexities of tax together.
Author - Mr. Anuj Paudel