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Optimising Tax Efficiencies Before the 2022/2023 UK Tax Year Ends

Updated: Apr 27, 2023

The 2022/2023 UK tax year is coming to an end on 5th April 2023, and as an accountant, I'd like to share some important strategies to help you reduce your tax liability and make the most of the available tax reliefs and exemptions. Whether you're an individual taxpayer or a business owner, these tips can help you prepare for the upcoming tax year.

1. Maximise your Personal Allowance and Income Tax Bands:

It's essential to fully utilise your personal allowance, which is the tax-free income you can earn each year. For the 2022/2023 tax year, the personal allowance is set at £12,570. Be sure to take advantage of this allowance and the Basic Rate, Higher Rate, and Additional Rate income tax bands.

2. Boost your Pension Contributions:

Contributing to a pension scheme is a great way to reduce your tax liability. Pension contributions attract tax relief, with the government topping up your contributions based on your income tax band. This strategy allows you to save for retirement while lowering your tax bill.

3. Make the most of your ISA Allowance:

Individual Savings Accounts (ISAs) provide a tax-free method for saving and investing. The 2022/2023 tax year's annual ISA allowance is £20,000. Ensure you utilise this allowance to the fullest, as any unused amount cannot be carried over to the next tax year.

4. Utilise your Dividend Allowance:

In addition to your personal allowance, there is also a tax-free dividend allowance, which is £2,000 for the 2022/2023 tax year. If you receive dividend income, ensure you make use of this allowance to reduce your tax liability on your dividend earnings.

5. Capitalise on your Capital Gains Tax (CGT) Allowance:

Your annual CGT allowance is the tax-free profit you can make from the sale of assets. For the 2022/2023 tax year, the CGT allowance is £12,300 for individuals and £6,150 for trusts. If you plan to sell assets that could result in capital gains, consider spreading the sales over multiple tax years to effectively use your annual CGT allowance.

6. Plan for Inheritance Tax (IHT):

Evaluate your estate and make use of any IHT exemptions and reliefs, such as the annual gift allowance, which permits you to give away up to £3,000 per tax year without incurring IHT. Also, consider transferring assets to your spouse or civil partner, as these transfers are typically exempt from IHT.

7. Donate to Charities:

Charitable donations can help lower your tax liability through Gift Aid, enabling charities to reclaim the basic rate tax on your donation. Higher and additional rate taxpayers can also claim extra tax relief through their self-assessment tax return.

8. Assess Your Business Structure:

If you're a business owner, evaluate whether your current business structure offers the best tax efficiency for your situation. Different structures, such as sole proprietorships, partnerships, and limited companies, have varying tax implications. Review your options and seek professional advice if necessary.

As we approach the end of the 2022/2023 tax year, it's crucial to assess your financial situation and take advantage of any available tax reliefs, exemptions, and allowances to optimise your tax efficiency. If you're uncertain about any of the strategies mentioned above, consult a professional accountant or financial adviser for personalised guidance.

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