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Your Complete Guide to the 2023/2024 Tax Year

The 2023/24 tax year is almost upon us, and you need to be prepared for changes to your personal tax. Take a look at our ultimate guide for all you need to know.

What Changes Can I Expect in the 2023/24 Tax Year?

The new tax year begins on the 6th of April, 2023. In line with Chancellor of the Exchequer Jeremy Hunt’s Autumn Statement, there are some big changes on the way that are likely to have a huge impact on you and your personal finances. If you’re looking to make your money go further in the upcoming financial year, it’s more important than ever to make sure you’re prepared early for the impact of any tax rises and cuts that may affect your hard-earned money.

At Unividual, we can help. We’ve put together our extensive guide to the 2023/2024 tax year, complete with top tips and practical advice designed to help you manage your earnings and maximise the benefits of financial planning. Knowing the best way to handle your money is essential, and we’ve got all the information you need to make practical, sensible financial decisions.

Key Dates in the 2023/24 Tax Year

Before we dive into some of the tax rates and changes impacting the 2023/2024 tax year, there are some important dates and deadlines you should be aware of.

  • 15th March 2023: The spring budget is set to be announced on Wednesday, 15th of March. The Chancellor normally delivers his statement directly after Prime Minister’s questions. It is predicted that the Spring Budget will reflect the government’s aims to halve inflation, boost growth, and reduce public debt.
  • 5th April 2023: The 2022/2023 tax year will draw to a close on April 5th. Take a look at our guide to help you make the most of your 2023 tax allowances before it’s too late.
  • 6th April 2023: The 2023/2024 tax year will begin on the 6th of April.
    31st July 2023: The second payment on account (POA) for self-assessment tax bills is due on July 31.
  • 5th October 2023: If you’re planning on registering for self-assessment in this financial year, the deadline for doing so is October 5th.
  • 31st October 2023: The deadline for filing paper returns on self-assessment tax falls on October 31st.
  • 30th December 2023: If eligible, the filing deadline for online returns if you want tax to be collected automatically from your wages and pensions is 30th December.
  • 31st January 2024: The 31st of January marks both the self-assessment tax submission deadline and the due date for the first POA of 2024.
    5th April 2024: The 2023/2024 tax year draws to an end.

What Are My Tax Allowances?

In order to pay less tax on your money, it is important to know what your tax-free allowances and thresholds are. As well as your personal allowance of £12,570, there are allowances on savings and ISAs that it may be worth taking advantage of in order to protect your wealth. For example, taking advantage of your pension allowance or investing your money into ISAs could help you reduce your tax bill and make your money go farther.

If you’re planning for retirement, investing your earnings into your pension is an incredibly tax-efficient option for saving, as you will receive a 20% tax relief on your contributions. The tax free pension allowance sits at £40,000, or 100% of your annual income, depending on which is lower.

If you’re thinking about placing your money in an ISA, it is worth remembering that you can invest up to £20,000 per year across your ISAs, and that returns from an ISA are tax free. Furthermore, investing in ISAs can protect money in your bank from being eaten away by rising inflation rates.

For more information on utilising your tax allowances, get in touch with our team.

TAX GLOSSARY: What is an ISA?
An Individual Savings Account is a special type of savings account that offers tax free interest up to a certain amount each year. You can get an ISA in the form of a cash ISA, offered by most banks and building societies or a stocks and shares ISA. They come in various types, each with different ways of helping you meet your savings and investment goals. 

 

What Changes Are Coming in the 2023/24 Tax Year?

Each new tax year, it is normal to expect adjustments to tax rates, allowances, and thresholds. After a challenging financial year for many, the 2023/24 tax year is no different, with several shake-ups set to be introduced. The Autumn 2022 budget announcement set out what changes can be expected.

Income Tax

Personal allowance has been frozen in England and Northern Ireland until April 2028. This is the amount of income you earn before you begin to pay income tax.  So, your personal allowance will remain at £12,570. On the basis that salaries are set to rise in line with inflation you might find yourself paying more tax on your income,  particularly if salary increases end up pushing you into higher tax brackets. Minimum wage earners in particular will find themselves impacted, with the minimum wage set to rise from £9.50 to £10.42 an hour for over 23s.

While basic and higher tax rates remain unchanged, the rate for additional tax payers has been slashed from £150,000 to £125,140, meaning more will find themselves pushed into paying the top rate of 45% on more of their income.

The tax rates for England, Northern Ireland, and Wales are identical. However, for Scotland, there are five tax brackets instead of three. For Scottish taxpayers, the starter rate, basic rate, and intermediate rate of paying tax will not change. However, the higher rate is set to rise to 42%, and top rate taxpayers will see an increase to 47%.

National Insurance

The 2022/23 tax year was a rollercoaster for national insurance contributions, with rates increasing by 1.25 percentage points in April 2022. In July, the contribution threshold increased from £9,880 to £12,570, and in the September mini-budget, the increase was abolished.

There will be no further changes to National Insurance when the new tax year begins. Employees who earn between £12,570 and £50,270 will pay at a rate of 12%, for earnings over and above £50,270 tax payers will pay 2%.

 

Inheritance Tax Freezes

The threshold for Inheritance Tax has been frozen until April 2028, leaving the nil-rate band at £325,000 and the residence nil-rate band at £175,000. Inheritance tax is charged at 40% of your estate that exceeds the nil-rate band.

It is so important you prepare your financial legacy for your loved ones to help ease their worries and protect your assets when you pass away. People who don’t prepare for this and have an estate of worth over £1,000,000 could be passing sizeable tax bills on to their next generation. Tax bills that you can’t pay with that inherited wealth. For help and advice in preparing your estate, check out our guide to inheritance planning.

Capital Gains Tax Cuts

From April 6th 2023, the tax-free allowance for Capital Gains will drop from £12,300 to £6,000. This will reduce the profit you can expect to gain from selling any valuable assets. It will also mean you will pay more tax on capital gains. The rate at which capital gains tax is charged has not changed and depends on which tax bracket you fall into. For basic rate taxpayers, the rate is 18% for property sales, and 10% on the sale of other assets, whilst for higher rate taxpayers, it is 28% for properties, and 20% on other sales.

Stamp Duty Cuts

The September mini-budget brought about immediate changes to stamp duty, and these changes will remain in place until 31st March 2025. Currently, first time owners do not need to pay stamp duty up to the value of £425,000. For existing owners, this is £250,000.

Business Tax Changes 2023/24

A lot of the personal tax changes will also affect businesses and business owners as well but there are two big changes that business people need to be aware of:

Dividends

The 2022/23 tax year brought changes that impacted on business owners and shareholders. For those who received dividends from a limited company, the tax rate changed to 8.75% for basic rate taxpayers, 33.75% for higher rates, and 39.35% for additional rates. In the 2023/2024 tax year, the rate of tax on dividends will not change.

Business owners will still feel the pinch though as the tax-free allowance on dividends will halve from £2,000 to £1,000. From April 2024, this will halve again to just £500. This means those who receive dividends will pay tax on more of their income, which could have a huge impact on their finances.

Corporation Tax

From the 6th of April 2023, Corporation Tax for business profits up to £50,000 will remain at 19%. However, above £50,000, this will rise to 25%. For businesses that make more than £250,000, the full rate of 25% will apply. This will impact on small businesses, setting them up to pay more taxes in the coming financial year.

PRO TIP : Making the most of self employment
“On face value tax rules seem simple when you are self-employed, but if you dig a little deeper there are some perks to being self employed. HMRC offer tax relief on a variety of allowable work-related expenditure which minimises your tax bill. Over two-thirds of self-employed people don’t have a pension and they are missing out on tax relief. For a basic rate taxpayer, every £100 you put into your pension will then be topped up with an additional £25 by the government. If you are paying the higher rate tax of 40%, then there will be an extra tax relief on top of this to claim, check this is still right. A financial adviser will help you get out of the mindset of “my business is my retirement fund”. If you make enough profit to pay tax at the higher rate of 40% then adding any donations to charity to your tax return can reduce your tax bill. The switch from a salaried role to working for yourself has challenges especially in the areas of taxation.” Greg Harris, Chartered Financial Planner

How Will Tax Changes Affect Me?

We’re all different and our circumstances are unique. There is no one tax year strategy that works for everyone. Depending on your exact situation and the mix of income, savings, debt, pension and investment within your portfolio, you’ll need to look at the tax year from different angles.  Overall you should be looking to plan into the longer term for tax efficiency. Thinking longer term also means not reacting in a ‘knee jerk’ manner to big changes, like the recent market reaction to the pandemic.

Working Professionals
Those in their twenties and thirties, who may be just getting started in their career or thinking about getting on the housing ladder, should take advantage of tax reliefs on individual savings accounts (ISAs) and savings to protect their money and build wealth for the future. Also make sure you make the most of life time ISAs if you are saving for a home. At this stage of life, your financial planning goals may be more oriented towards saving but it is never too early to start preparing for the future and looking at retirement and how to protect your wealth if you can’t work. This is especially important if you have a mortgage. For more information, take a look at our guide to managing your money in your 20s and 30s.

Business Owners
Business owners are set to be impacted by changes to taxes on dividends, as well as rising corporation tax levels. Having already felt the pinch through dividends tax increases in 2022, as well as the prospect of further cuts that will put you at a loss, its natural to feel concerned about how rising tax bills will impact the future of your business and your own personal finances.

At Unividual, we specialise in financial planning for businesses, and can offer help and support in preparing you and your company for what’s to come. For more information, feel free to get in touch.

Parents and Families
The £50,000 threshold for reductions in child benefits hasn’t changed. However, with salaries set to rise in line with inflation and tax brackets remaining the same, this will mean more parents will have to pay some of it back in the 2023/2024 financial year. Child benefit entitles you to £24.00 a week for your eldest child, and £15.90 for each additional child. If you’re thinking about saving for your child’s future, you can pay up to £9,000 a year in a junior ISA. This will not only help set your child up for adulthood, but help you take advantage of the tax reliefs that come with investing in ISAs. There are some important considerations that same-sex parents need to take in to consideration also when planning finances, especially when it comes to inheritance planning and ensuring each parent maintains financial independence like in all relationships.

 

Couples - not all of us are parents

Not all of us are parents in the world, which is why it is important that financial advice is bespoke to each family, especially the families with dogs and cats for furry children. A lot of couples without children tend to worry less about protecting their wealth if they can’t work or inheritance planning. This is a dangerous mindset and it is just as important to protect your wealth as it is for those with children.

There are also considerations that same-sex couples need to take in to account when it comes to utilising tax allowances and the benefits there are for getting a civil partnership or getting married. Hear from one of our clients who we are proud to share is part of the LGBTQIA community:

“Unividual have managed mine and my partner’s finances for around ten years. We started off with mortgages, a bit of protection and building our savings. Our financial adviser is based in the London office and he has supported us throughout 3 house moves up and down the country. Unividual have been there every step of the way and with every big decision we have made. We are now in our late 30s and we are starting to review our plans for retirement. As our careers have grown and our savings been nurtured our finances are becoming more complex and we are having to focus on the implications of tax, plan inheritance and ensure we have what we need for retirement. Without Unividual there is no doubt we wouldn’t be where we are now financially. Thank you for everything you have done and everything you continue to support us with” 

Laura, Worcestershire

Retired People or those nearing the next exciting chapter

As we have already mentioned, saving for retirement is one of the best steps you can take to pay less tax, and will be invaluable for later in life. If you’re nearing retirement age, it may be worth considering how much of your money you can invest into your pension pot to maximise your tax-free allowances. It’s worth remembering that you can carry over unused allowances for up to three years, so even if you didn’t make the most of your allowances in the previous financial year, you can still reap the benefits. A lot of people worry about getting retirement advice as they feel they have left it too late. We often find that clients like this never find it half as bad as what they imagine. Getting a financial adviser to give you an insight in to where you are at currently gives you a chance to improve your financial situation and the sooner you start that the more you will enjoy the next chapter of your life.

Where do I even start with any of this?

We don’t like putting people in to the type of stereotypical boxes listed above because in our world of finance we see each person or business as unique and individual. You could be a business owner and nearing retirement with a family or you could be a couple, with no children, living the dream on a barge boat deciding what to do with an inheritance lump sum. If you are managing your own finances it is important that you look at your situation, what are your goals in life and where do you want to go and does your existing financial strategy fall in line with those goals. Many of us aren’t doing anything to manage our money, either because we don’t make time, can’t find time, don’t prioritise self-care or just don’t understand where to even begin. If you are ready to put yourself first then you know where we are. You are never too poor, too rich, too young or too old to start planning your own finances.

When it comes to planning for tax you might be tempted to wait until closer to the end of the financial year to make the most of your tax allowances. However, getting the ball rolling earlier can be invaluable when it comes to stretching your money further and keeping more of what you earn. If you’d like to start planning early, but don’t know how to get started, our team is on hand to help you with your 2024 financial planning. Everybody’s circumstances are completely unique and how you’re set to be impacted by the 2023/2024 financial year will reflect that. To discuss your individual financial concerns, get in touch with one of our helpful, friendly financial advisers, as experts they can help you manage your money no matter what stage of life you’re in.

Reach out to one of experts in tax and financial planning

    Author & Editor: Cherie-Anne Baxter

    Date Written: 7th March 2023

    Last updated: 15th March 2023

    Risk Warnings: 

    Approver Quilter Financial Limited 15/03/2023

    The content and details of this article are as accurate as the day it was written or updated.

    Tax treatment varies according to individual circumstance and is subject to change.

    The value of pensions & investments and the income they produce can fall as well as rise. You may get back less than you invested.

    Inheritance tax planning is not regulated by the Financial Conduct Authority.

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