As we start the new tax year, there are some big changes affecting taxpaying individuals.
“Most taxpayers are affected by one or several of the changes that are introduced this April,” says Emily Bridges or re:accounts in Stevenage. ”Now is definitely the time to review your approach to minimising your tax, making the most of the opportunities available.”
Here’s a handy summary of the key changes that may impact you:
-
Capital gains tax
This annual allowance is also reduced. Capital gains tax is now payable on gains over £6,000 for individuals and personal representatives, and £3,000 for trustees. As with dividend tax, these levels will be reduced by 50% on 6 April 2024 to £3,000 and £1,500 respectively. The capital gains tax rate remains 10% basic rate and 20% higher rate apart from residential property, which attracts a rate of 18% and 28% respectively (main residences are excluded).
Changes to the capital gains tax rules regarding the transfer of assets between spouses and civil partners who are divorcing or separating are introduced on 6 April 2023. They will now have up to three years, after the year they cease to live together, to make no gain or no loss transfers of assets, and unlimited time when the assets are the subject of a formal divorce agreement.
-
Dividend tax
The dividend allowance is now just £1,000 for the tax year 2023/24, representing a cut of 50% compared with the previous year. It reduces again to £500 on 6 April 2024. This is a big reduction. Directors who are also company employees should review how they are extracting money from their companies. Is the ‘traditional’ minimal salary and higher dividend payment still the best option for you?
-
Income tax
The threshold for paying basic rate (£12,570) and higher rate income tax (£50,271) is frozen. So, what’s the change? More than a million taxpayers are expected to face the 40% higher rate tax charges for the first time. Plus, the additional rate threshold is lowered from £150,000 to £125,140. HMRC reports that 232,000 taxpayers will pay the additional rate for the first time. For individuals earning between £125,140 and £150,000, the extra tax liability is £621.
-
Pension tax
The annual allowance and the minimum tapered annual allowance are increased from £40,000 to £60,000. This decision was taken to encourage highly skilled workers to stay in the labour market. In addition, the lifetime allowance charge has now been removed.
The money purchase annual allowance (MPAA) limit is increased to £10,000 from £4,000 during 2022/23. This means that anyone making drawdown from their pension is no longer limited to a £4,000 cap on the amount they can pay into their pensions pots a year.
As we start the new tax year, now is a great time to ensure that your pension contributions and tax liability are as efficient as possible
How do these changes affect you?
Are your finances as tax efficient as possible?
Saving clients’ money by reducing their tax liability is the superpower of the re:accounts team. Start will an initial discussion … no stuffy jargon, no obligation … just plain talking, expert advice from our tax experts (with a cuppa). Let’s talk.
