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With Franks Accountants
This guide outlines essential strategies and considerations for minimising your tax burden before the end of the tax year – make the most of your allowances & reliefs.
Background
As the curtain begins to close on the 2023-24 tax year, ending on 5 April 2024, understanding and acting upon tax-saving opportunities becomes paramount.
With just under two months left, it’s vital to position yourself advantageously within the UK tax system.
This guide outlines essential strategies and considerations for minimising your tax burden, ensuring you make the most of your allowances and reliefs.
Pre-empt the High Income Child Benefit Charge
If you or your partner receive Child Benefits and one of your incomes is on course to exceed £50,000 this tax year, you’ll face the High Income Child Benefit Charge.
This means for every £100 your income surpasses £50,000, you’re required to repay 1% of the Child Benefits received. Once income reaches £60,000, the entirety of the Child Benefit is reclaimed
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It’s crucial to register for self-assessment to address this clawback if you haven’t already.
Understand the Impact on Higher Earnings
Crossing the £50,270 Threshold
Entering the 40% income tax bracket happens once your income exceeds £50,270.
Significant dividend earners should note that dividends exceeding this threshold are taxed at 33.75%, a stark increase from the standard 8.75%.
The £100,000 Income Effect
Earning above £100,000 triggers a reduction in your personal allowance. For every £2 above this threshold, your £12,570 personal allowance decreases by £1, disappearing entirely at an income level of £125,140.
This reduction combines with the 40% tax rate to create an effective 60% tax rate for earnings between £100,000 and £125,140.
Broaden Your Tax Planning Horizon
While focusing on income and dividend taxation is critical, it’s equally important to consider other areas for tax efficiency.
Exploring ways to reduce capital gains tax, inheritance tax, corporation tax, VAT, and National Insurance contributions can further lower your tax footprint.
Act Now to Secure Your Financial Future
The urgency to review and adjust your tax affairs cannot be overstated. With the tax year concluding on 5 April 2024, now is the moment to assess your situation.
Engaging with a tax professional can provide tailored advice and strategies, ensuring you utilise every available tax advantage before the deadline.
Taking proactive steps now can significantly influence your tax obligations and financial well-being in the 2023-24 tax year. Don’t miss the opportunity to optimise your tax position and safeguard your assets against unnecessary taxation.
If you need some help, get in touch.
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