When did you last review your financial books?
Are your strategies in place to stay ahead of the curve?
How can you ensure tax efficiency while complying with the tax regulations?
These are some pertinent questions that, if left unanswered, will give you sleepless nights.
As 2023-24 presents its challenges, it’s time for you to stand confident to steer through the complexities of tax planning with smart strategies. Whether you’re an accounting firm or an individual, having a tab on the pulse of the changes and crafting a robust financial blueprint can make a difference between thriving and surviving.
Join us as we chart a course through to tax planning excellence. But let’s start with some necessary information.
UK Taxes Rates for 2023-24: An Overview
In the UK’s income taxation, 2023-24 is like a déjà vu, as the familiar tax rates from the previous fiscal year are here to stay. Basic rate taxpayers continue to enjoy a 20% tax rate, while higher rate taxpayers are in the 40% bracket.
As for those at the top of the income pyramid, additional rate taxpayers maintain their status quo at 45% – at least for those not residing in Scotland.
However, the real action is up north.
They’ve decided to mirror the reduction of their top-rate threshold to £125,140 in Scotland. But that’s not all – Scotland has gone further, giving its income tax system a bit of a facelift for the 2023-24 fiscal year. Now that you know the tax rates, it’s time to look at some effective strategies for tax planning.
- Maximise your Pension Savings
It’s like a tax-free treasure hunt! You have the golden opportunity to stash away £40,000 yearly. And guess what? If you’ve been thrifty with your pension savings in the past three tax years, you can catch up by bringing forward those untapped allowances.
But here’s the catch. Venture beyond this, and you’ll be in the not-so-welcome tax charge. Be prudent and stay within the boundaries!
- Boost your State Pension
Don’t let gaps in your National Insurance record leave holes in your retirement income. You can patch them up by making voluntary contributions for the past six years. And there’s good news for those born after April 5, 1951 (men) or April 5, 1953 (women) – you have until July 31, 2023, to fill in the gaps from April 2006 to April 2016. After that, it’s only the last six years you can fill.
- Embrace your ISA
Here’s a tax-friendly gift from the government. UK residents aged 18 and above can stash up to £20,000 annually in an ISA. Parents can also set up junior ISAs for their kids, adding up to a tidy £9,000 per child for the 2022/23 tax year. It’s not just a savings account. It’s a financial superhero that can help fund higher education and more.
- Choose Your Business Structure Wisely
Imagine embarking on a new business journey, a venture into the unknown. The key here is flexibility. If you anticipate potential losses in the early days, consider the skill of a sole trader or partnership setup. This allows you to offset those losses against your other income.
But if your crystal ball predicts consistent profits of £50,000 or more, a company structure might be your financial superhero. Why? It lets you protect those untapped profits, keeping them away from higher tax rates that could otherwise gobble them up. Plus, you get the bonus of making tax-smart pension contributions.
- Harness Your Losses
As a business owner, it is important not to get demotivated by trading losses. You can use these losses to save on taxes. Such trading losses can easily be set off against your taxable income.
If that isn’t great, we have more. You can extend this tax-saving magic to offset trading profits from the three tax years before the loss year. However, there’s one condition. You must claim this relief by 31 January 2024 for losses in 2021/22. There’s a cap on how much you can offset against total income – it’s the higher of £50,000 or 25% of your income for the year. Remember, this extended loss carry-back isn’t a time traveller; it’s only available for losses in or before 2021/22. So, make the most of it while you can!
- Dividend Delight
If you own a company, consider paying yourself dividends rather than salary for the 2022/23 tax year. It’s usually more tax-efficient. But watch out because, from April 2023, dividend payments may be less tax-friendly than salary payments for higher or additional rate taxpayers. The tax landscape is shifting!
- Explore SEIS/EIS/VCT Investments
These acronyms are your tickets to tax benefits. If you’re an experienced investor or business owner, you can score big with the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCTs). They offer tax relief and other perks. Dive in, but tread carefully.
- IHT Planning
Reduce your Inheritance Tax (IHT) by gifting assets and staying within the nil rate band. Gifts to spouses or civil partners are tax-free, and gifts to other family members can be tax-efficient. Most gifts become fully exempt from IHT if you survive seven years. Plan wisely to secure your legacy.
Secure your Tomorrow
Don’t let tax surprises sneak up on you! Keep HMRC in the loop about any changes affecting your tax code. It’s like giving them a heads-up to get your taxes right from the get-go. No more tax surprises!
Looking for Tax Assistance? Unlock unparalleled tax planning expertise and reshape your fiscal future with Fourfold UK. Experience the power of strategic innovation. Connect with us today and take the first step towards financial excellence.