What action do you need to take before 5 April 2023? A top priority should be to think about how external factors, such as high inflation and reduced or frozen allowances, could impact your finances.
Have you considered whether you will be affected by the impending changes to Capital Gains Tax (CGT) or Dividend Tax, both announced in the Autumn Statement? If so, have you thought about investing up to £20,000 this tax year in a stocks and shares Individual Savings Account (ISA)?
The Dividend Allowance will be reduced from £2,000 to £1,000 this April and then fall further to £500 from April 2024. In addition, the annual CGT exemption will fall from £12,300 to £6,000 next tax year (from April 2023) and then to £3,000 the following tax year (from April 2024). Dividends received on any shares held within an ISA are tax free and won’t impact your Dividend Allowance. In addition, any profit you make when selling investments in your stocks and shares ISA is free of CGT.
Prioritise your pension too
Both the Lifetime Allowance and the Annual Allowance are frozen, at
£1,073,100 and £40,000 respectively. When you consider that these allowances haven’t increased with inflation, it effectively means those saving to the maximum extent possible with tax concessions can save less in real terms each year.
Preparation is key
With an increasing number of people likely to be impacted, we can’t stress
enough the importance of tax year end planning. Although some of these changes don’t come in with immediate effect, it is vital to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and to prepare for the changes that come in over the next few years. With plenty to consider and factor into your financial plan, valuable financial advice remains central to achieving your goals and aspirations.