Year End Tax Review 2023/2024 – Blog 1 – Tax Uncertainty in an Election Year
Post Author:
Anne Melville
Date Posted:
February 15, 2024
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2023 was a lot more stable, both politically and economically, than 2022. Rather than the multiple fiscal events of the latter, there was a single Budget plus an Autumn Statement. However, with a pre-election Budget due on 6 March 2024, we wait to see whether there will be major changes announced for 2024/2025, particularly in respect of tax cuts. Any such changes may affect end of year planning for 2023/2024.
For example, it may turn out to be advantageous to delay receiving income such as bonuses or dividends until next tax year, if they would be taxed at lower rates (perhaps because the government decides to unfreeze thresholds).
Update – please see our series of blogs regarding the content of the March 2024 budget:-
UK Government March 2024 Budget
In our Year End Tax Review 2023/2024 series of blogs we set out what you need to know about the tax landscape (as currently known) over the next 12 months. But please do check with us before finalising any big financial decisions, just in case the tax treatment changes after these have been published.
Almost all the thresholds for both National Insurance Contributions (NICs) and income tax have been frozen until April 2028. With inflation still well above the 2% target, this freeze will pull a lot of taxpayers into the higher tax bands as their salaries or business profits rise. This also has a knock-on effect on the amount of personal savings allowance (PSA) available to set against income such as interest, where rates have of course risen significantly in the last year or so. Income within the PSA is taxed at a nil rate.
Once into the 40% band (42% in Scotland), the PSA is cut from £1,000 to £500 per year; it disappears completely for anyone who pays income tax at 45% (47% in Scotland), which applies when income exceeds £125,140.
The dividend allowance will be cut to £500 from 6 April 2024, having been £1,000 for 2023/2024. This means more dividend income will be taxable each year, although the tax rates applicable to dividends are not changing in 2024/2025.
The personal allowance has been frozen at £12,570 until April 2028. Note that the personal allowance is tapered away by £1 for every £2 of income over £100,000 per year.
The annual exemption for capital gains tax will be halved from £6,000 to £3,000 in 2024/2025.
The combination of the allowance cuts and threshold freezes will affect the tax and NICs payable by directors and shareholders of family companies.
All employers need to budget for increases in the rates of National Living Wage and National Minimum Wage from 1 April 2024.
We recommend you undertake an annual review of your financial affairs, in order to check that you are not paying more tax than you need to and to see whether any structures you set up in the past are still appropriate. Between now and the end of the tax year (5 April 2024) is a good time to assess whether you have claimed all the relevant allowances and are as well defended against high tax charges as you can be.
Of course, the personal circumstances of each individual must be taken into account in deciding whether any particular plan is suitable or advantageous, but the suggestions in the following series of blogs may give you some ideas. We are of course happy to discuss them with you in more detail.
The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.
In the following series of blogs, we will cover Tax Planning 2023/2024 in full and what it means for you:-
Blog 2 – Self Assessment key dates
Blog 5 – Will you get a full state pension
Blog 7 – Abolition of the Pensions Lifetime Allowance (LTA)
Blog 9 – Principal Private Residence (PPR) Relief
Blog 10 – Furnished Holiday Lettings
Blog 12 – Inheritance Tax (IHT)
Blog 13 – Change in basis of assessment
