Tax Year End 5th April 2024 Planning Checklist

The end of the UK tax year 5^th April 2024 is already upon us with pension and investment providers already issuing and closing off deadlines for submission of pension or ISA contributions before tax year end.

In addition, deadlines for using up your allowances are also here as well as planning for new allowances next year such as the new Lump Sum Allowance (LSA) and Lump Sum Death Benefit Allowance (LSDBA) that start on the 6^th April as the Lifetime Allowance (LTA) comes to an end.

To help you, we set out a simple tax year end checklist for you to ‘tick off’ this weekend:

Capital gains tax (CGT)

• Use up this year’s annual exemption of £6,000 can save you up to £1,200 in tax.   CGT rates for investments (non property) are 10% for basic rate taxpayers and 20% for higher rate taxpayers.  CGT rates for property are 18% for basic rate taxpayers and 28% for higher rate taxpayers.  Any unused relief cannot be carried forward so “use it or lose it”. The CGT allowance reduces from £6,000 to £3,000 on 6 April 2024 and is then be frozen at £3,000 until 2027/28 according to current government plans.
• Bed and ISA – moving general investment account funds to ISAs funds – you need to give instructions now to your investment platform to get this done before 6^th April.
• Bitcoin gains – record bitcoin prices today mean you may be sitting on huge, taxable gains.  Sell some off and use up your CGT allowance (if you are not a professional currency/crypto trader) before 6^th April.
• Consider transferring assets between spouses as this does not create a CGT liability.  You will then have 2 X £6,000 CGT allowance to use.
• Remember it is the profit/gain that uses up the allowance, not the total value so you may have to sell off/transfer £10k, £20k or £30k of assets to use up the full £6k CGT allowance.

Income tax

• Make a pension contribution to get your taxable income below £125,140 to avoid 45% income tax.
• Make a pension contribution to get your taxable income below £100,000 to get your full personal tax allowance of £12,570 back.  This is an effective tax relief rate of over 60% when you combine the 40% tax relief with the recovery of your personal allowance.
• Make a pension contribution to get your taxable income below £50,000 to recover your full child benefit.  Individual earnings above £60,000 pa mean you are not entitled child benefit.
• If you have not used your full personal tax allowance e.g., you earn £10,000 pa meaning a remaining personal tax allowance of £2,570, you can transfer '10%' of your personal tax allowance (10% X 12,570 = £1,257) with the transferrable allowance actually £1,260 to a higher earning spouse or civil partner, meaning your spouse/civil partner may secure a personal allowance of up to £13,830 – you must do this before 6^th April.

Inheritance tax (IHT)

• Use you annual £3,000 gifting allowance to transfer assets to loved ones e.g., children.
• You can also use any of your unused gifting allowances from the previous year.  For example, if you and your spouse/partner did not use any of last years IHT gifting allowance, you have £3k this year and £3k from last year – total £6k  This means both you and your partner could make IHT free gifts immediately of up to £12,000 before 6^th April.

Shares, savings, pensions, and investments

• Declare a dividend (in your business), if you have not already done so to use up your £1,000 pa dividend allowance (this reduces to just £500 pa on 6^th April).
• Make sure you have used your full ISA allowance of £20,000 pa.
• Make sure you have used your child’s Junior ISA allowance of £9,000 pa.
• On top of tax-free ISA allowances, basic rate taxpayers have a savings allowance (tax free interest) of up to £1,000 pa and higher rate tax payers have a savings allowance of £500pa. Use it or lose it.
• Non-taxpayers have an additional £5,000 pa (in interest) additional tax-free savings allowance on top of the above £1,000 savings allowance and £1,000 dividend allowance.  Make sure your investments are in the right place to benefit from this additional allowance if you have low income.
• For wealthier investors, do not forget you have a Venture Capital Trust (VCT) allowance of £200,000 that you can claim 30% tax relief on and up to £2m allowance in Enterprise Investment Scheme (EIS) allowances that can also attract tax relief of 30%.  Use them or use them.
• Pensions Annual Allowance (AA) is £60,000 pa.  Make sure you and your employer have used up as much of your pension annual allowance as you can.
• Pensions Money Purchase Annual Allowance (MPAA) is a reduced pension annual allowance if you have used flexible drawdown already and drawn down some ‘taxable’ income.  Make sure you and your employer have used up as much of your MPAA as you can.
• Pensions carry forward unused tax relief:  You and your employer can make pension contributions to fill up this year’s allowance you can use unused allowances from the previous 3 tax years.  If you do not use up any unused allowance from tax year 2020/21, it drops off and you lose it on 6^th April.

This weekend must be your weekend of action to use up allowances at tax year end or lose them.