End of tax year allowances:
As the tax year draws to a close, it is time to take stock and undertake any last-minute tax planning. This should include a review of available allowances for the 2022/23 tax years and consideration of the extent to which they have yet to be used.
The personal allowance is set at £12,570 for 2022/23. It is frozen at this level until 6 April 2028.
The personal allowance is lost if it is not fully utilized in the tax year. Where the allowance remains available, consider whether it is possible to advance income so that it is received before 6 April 2023 rather than on or after that date.
If the personal allowance cannot be used and the recipient is married or in a civil partnership, as long as their spouse or civil partner pays tax only at the basic rate, the marriage allowance can be claimed to transfer 10% of the personal allowance.
The dividend allowance is available to all taxpayers regardless of their marginal rate of tax. Dividends sheltered by the allowance are taxed at a zero rate. The dividend allowance is set at £2,000 for 2022/23, but it is to fall to £1,000 for 2023/24 and to £500 for 2024/25.
It will be beneficial to advance a dividend planned for 2023/24 where, because of the lower dividend allowance applying for that year, it may not be sheltered by the dividend allowance if paid in 2023/24 but would be tax-free if paid in 2022/23. Remember that where an alphabet share structure is not in place, dividends must be paid in accordance with shareholdings.
Personal savings allowance
The personal savings allowance is available to basic and higher-rate taxpayers to offset against interest from savings. Basic-rate taxpayers have a personal savings allowance of £1,000 for 2022/23, and higher-rate taxpayers have a personal savings allowance of £500.
Spouses and civil partners could also assess how their savings are held to ensure that, where possible, interest is covered by the savings allowance, for example, by transferring savings held by a partner paying tax at the additional rate to his or her spouse or civil partner paying tax at the basic rate.
Capital gains tax annual exempt amount
The capital gains tax annual amount is set against net gains for the tax year (chargeable gains less allowable losses), reducing the amount charged to capital gains tax. Each individual has their own annual exempt amount. This is set at £12,300 for 2022/23 and is lost if not used by 5 April 2023.
Where the exempt amount for 2022/23 remains available, consideration should be given to accelerating disposals giving rise to a gain so that they fall in 2022/23. This is particularly important this year as the annual exempt amount falls to £6,000 for 2023/24. It is further reduced to £3,000 for 2024/25. Making the disposal after 6 April 2023 may increase the amount of the gain that is taxed.
Inheritance tax annual exempt amount
Individuals can make £3,000 worth of gifts each tax year free of inheritance tax. If unused, the inheritance tax annual exempt amount can be carried forward one year before it is lost. If no gifts were made in 2021/22, gifts totaling £6,000 can be made free of inheritance tax in 2022/23.