Tax saving – use it, don’t lose it before 5 April 2023

With the cost of living increasing and tax rates rising, you will no doubt be thinking of ways to tighten your belt. It is worthwhile to take action now which could save you tax and make the most of tax planning before we hit the end of the tax year.

Capital gains tax (CGT) annual exemption

The annual CGT annual exemption for 2022/23 is £12,300 but from 6 April 2023 this reduces to £6,000 and from 6 April 2024 to £3,000. You might want to think about accelerating the disposal of assets with a capital gain sooner rather than later. For example, if you are selling a residential property and the exchange is pre-5 April 2023, the tax saving on the capital gain will be £1,764.

Review your unused capital losses

It is possible to carry forward unused capital losses to offset future capital gains, which could take the sting out of the reduced annual exemption. Check to see if you made the claim as this needs to be with HMRC within four years of the end of the tax year of loss. The deadline for claiming capital losses arising in 2018/19 is therefore 5 April 2023.

45% income tax

The 45% income tax threshold will reduce from £150,000 to £125,140 from 6 April 2023, which is a significant drop. For those earning, say, £120,000, a bonus of £25,000 paid pre-6 April rather than post-6 April will save income tax of £1,250.

Claim your repayment

Check to see if you have any tax due to you from HMRC for earlier years. It is possible to go back four tax years, so the deadline for a tax refund for the 2018/19 year is 5 April 2023.

Review your PAYE tax code for 2023/24

HMRC starts to issue PAYE tax codes around now and they are often wrong. This could well mean the tax paid on your employment income from 6 April 2023 is incorrect. Check this now to avoid a tax bill come 31 January 2025.

Check your PAYE code to make sure the personal allowance is correct – for high earners, this may not be due or, if your income has dropped, it should be reinstated. HMRC will estimate personal pension contributions and charitable donations rather than the actual amounts for 2023/24. As these can vary significantly from year to year, it is worth checking that these are also correct.

Mop up unused personal pension relief

Have you any unused pension allowances from earlier years? It is possible to carry forward unused relief from the previous three tax years (2019/20, 2020/21 and 2021/22) and mop this up in the 2022/23 tax year. However, the unused relief for 2019/20 will be lost if it is not used by 5 April 2023.

Check your national insurance contributions (NICs) are up to date

Entitlement to the state pension depends on your “qualifying years” of NICs. 35 years of contributions entitles you to the full state pension. Missing years at retirement age can result in a shortfall in the pension due. However, it is possible to catch up on these missing years by making voluntary contributions usually up to the last six years.  This window is currently extended back to 6 April 2006 but only until 5 April 2023. If you think you need to check, you must do so now. From 6 April, the six-year window will revert and the opportunity to mop up tax years before 2017/18 will be lost.

How we can help you

We specialise in helping clients review their tax position and can provide advice on maximising tax relief and your UK reporting and filing obligations. Contact us here.