As lambing season is well under way, it is worth taking stock of your finances to ensure you have used any allowances available to you. Here is a checklist of the allowances you may be able to utilise before 6 April if you haven’t already.
You are able to contribute to a pension personally or via an employer, and attract income tax relief up to 100% of your earnings, subject to the Annual Allowance of £40,000. If it is an employer contribution, the company will qualify for Corporation Tax relief.
Pensions have other valuable tax benefits, such as tax-free growth on investments, and are usually exempt from Inheritance Tax (IHT), allowing an immediate reduction to your estate for IHT purposes, as well as being able to pass monies on to the next generation tax efficiently.
Since the 2017/18 tax year, the ISA allowance has remained at £20,000 per person, where monies can grow free of income Tax and Capital Gains Tax. Monies are generally directed towards cash or stocks and shares ISAs, or a mix of them both, but other ISAs are available such as lifetime or innovative finance ISAs.
Junior ISAs are available to kick start a child’s savings, with an allowance of £9,000. Monies are held in the child’s name and cannot be accessed until they turn 18.
Both allowances will remain in the 2022/23 tax year.
Capital Gains Tax
Another year passed without any increase to Capital Gains Tax (CGT) rates, with Rishi Sunak shelving the proposed hike in early December 2021.
The Office of Tax Simplification (OTS) made the recommendations, following the review to increase CGT in line with income tax, to help the financial situation post-covid. However due to the impact this would have on taxpayers, as well as the administration involved by HMRC, the proposal has been put on hold for the time being.
The exempt amount for realised gains is£12,300 in this tax year, with no availability to carry forward the allowance to the next tax year.