Are you still tax efficient?
Your tax strategy will only stay robust if you keep it up to date. This is especially true if your personal circumstances change — for example, if you fall into a different income tax bracket or start a new business.
But even if everything else in your life is constant, tax legislation is always evolving, and 2023 is no exception. You’ll need to examine your tax affairs regularly to ensure you’re not spending more than you should.
Are you still tax efficient in 2023? What can you do to improve your tax efficiency?
Make use of your personal tax allowance
Most individuals in the UK don’t need to pay income tax on the first £12,570 they earn each year. This is called your personal allowance.
Higher earners, however, lose a portion of this allowance for every £2 they make over £100,000, with additional rate taxpayers losing their personal allowance altogether.
If you make more than £100,000 annually, you may be able to reclaim your personal allowance by paying the difference into your pension pot. This allows you to hit two birds with one stone: helping you save up for retirement while you reduce your income tax liability.
Claim marriage allowance
If you’re married or in a civil partnership and earn less than your partner, you may be able to use marriage allowance to reduce your partner’s tax bill.
Marriage allowance lets you transfer £1,260 of your personal allowance to your spouse or civil partner. To benefit from this tax break, the lower earner must usually make less than £12,570 a year, while the higher earner’s total income should be no more than £50,271 a year.
According to HMRC, claiming marriage allowance could save you up to £252 as a couple each tax year. It may even be possible to backdate your claims by up to three years.
Use your personal savings allowance
Many individuals in the UK can receive some interest from their savings entirely tax-free. If you don’t exceed the personal allowance threshold or pay the basic rate of tax, you won’t need to pay tax on the first £1,000 you make from savings interest.
This falls to £500 for higher-rate taxpayers, while additional-rate taxpayers must pay tax on all interest on savings.
Take advantage of your annual ISA allowance
You usually pay no tax on interest earned from Individual Savings Accounts (ISAs). All individuals have an ISA allowance of £20,000 a year, regardless of earnings, making this a tax-efficient way to reduce your personal tax bill.
There are four main types of ISAs in the UK:
● cash ISAs
● stocks and shares ISAs
● innovative finance ISAs
● lifetime ISAs
If you’re considering switching ISAs or opening a new one, we’d recommend speaking to your accountant to ensure you get the best deal, or speak to an independent financial adviser.
Think about your estate plan
It’s never too early to think about your estate plan. A good inheritance tax strategy can protect your family’s financial future and give you more control over your assets after you’re gone. Actions you can take to reduce your inheritance tax liability may include:
● distributing your assets during your lifetime
● setting up a trust
● donating to charity
● transferring your basic tax-free allowance to your surviving spouse.
Inheritance tax law can be complicated, however, so we’d recommend working with a professional to help you easily navigate the tax system. We always recommend that you seek specialist tax advice.
Unless you’re a tax expert yourself, personal tax planning can be challenging. No one wants to overpay their tax bill — but you also need to stay compliant. RPG Crouch Chapman’s personal tax planning and compliance services can help you feel more in control of your finances.
As qualified accountants, we’ll keep you in the loop with any new opportunities, obstacles or legislation changes that could affect your liabilities. We can also revisit your tax strategy regularly to help you stay tax-efficient throughout 2023 and beyond.
If you are wondering are you still tax-efficient in 2023 Get in touch today to find out how we can help.