Your 2024 tax year checklist

April 5th, the tax year end, is not far away. Time is running out to use allowances and exemptions.

| 9 min read

Time is running out until the end of the tax year, so it’s an opportune time to review your tax planning and ensure you are making the most of the available allowances and reliefs.

Tax years run from 6th April one year to 5th April the next and, in most cases, if you don’t use the various allowances before 5th April, they are lost forever. To help with your planning here is a quick summary of the main considerations.

Tax year end checklist

1. Use your ISA allowance

    ISAs are often the first port of call for investors looking to save tax. They are simple, flexible and tax efficient. As well as being able to invest in a wide range of assets you can easily access your money, so they are suitable for a variety of saving and investing needs.

    The ISA allowance is available to any UK resident over 18 and can be split between different types – the main ones being Cash and Stocks & Shares. Charles Stanley Direct offers Stocks and Shares ISAs. These could deliver a higher return than Cash ISAs over the longer term but remember that there is a risk the value of your investments could fall – especially in the short term.

    The benefits:

    • Gains realised on the sale of stocks and shares within an ISA are free from capital gains tax (see below)
    • Any dividends or interest income are free of tax
    • In the event of the death of a spouse/civil partner, the surviving spouse/civil partner can inherit the tax benefits.
    • ISAs are portable and can be transferred between providers without losing their tax-free status.

    By using your full ISA allowance each year (£20,000 in the current 2023/24 tax year) it’s possible to build up a large pot of money sheltered from tax. Remember too that ISA investments don’t need to be declared on a tax return, so they can also simplify your finances.

    If you are investing in a Charles Stanley Direct Stocks & Shares ISA, you don’t have to decide on the investments right away. You have the option of leaving cash in the account until you decide, though this should only be considered a temporary arrangement and a higher interest is likely to be available through a competitive cash ISA or a low risk fund product such as a money market fund.

    Open a Stocks & Shares ISA

    2. Open or add to a Junior ISA

    Education, a first car, getting married and a deposit for a house are just some of the daunting costs faced by the younger generation. Investing from an early age could be a great way to give your child or grandchild a head start towards some or all of these.

    A Junior ISA (JISA) remains a popular option with these life goals in mind. Family and friends can help build tax-efficient investments for a child with an allowance of £9,000 a year. Importantly, it has the same tax benefits as an adult ISA – there is no tax on profits or income.

    Withdrawals are possible from age 18 when it automatically converts to an adult ISA, meaning the pot can be useful to help with the cost of university or a deposit for a house, or invested for much longer.

    A parent or legal guardian of a child under the age of 18 and UK resident can open a JISA. With the Charles Stanley Direct Junior Stocks & Shares ISA this can be done online. Grandparents, relatives or family friends can also contribute to the account.

    The parent or guardian is responsible for the management of the JISA and can make investment decisions, but the investments belong to the child. Investors can have either a Cash JISA or a Stocks and Shares JISA, or one of each, subject to the annual investment limit.

    Open a Junior ISA

    3. Optimise pension contributions

    Almost everyone includes a comfortable retirement as one of their financial goals. Pensions are often a highly effective means of achieving this due to the tax relief available on payments into them.

    Currently, anyone under 75 with UK earnings can receive pension tax relief when they make a contribution within the annual allowance to a personal pension such as the Charles Stanley Direct SIPP. 20% is added by HMRC and any further higher or additional rate income tax relief can be reclaimed – potentially a simple way of reducing your income tax bill for the year.

    For example, an investor contributes £8,000 into their SIPP and £2,000 is claimed back from HMRC by the pension provider:

    • A higher rate taxpayer could claim back up to a further 20% via their tax return, reducing the overall cost of the contribution to as little as £6,000.
    • In the same instance, additional rate taxpayers could claim back up to a further 25% making the cost just £5,500 for a £10,000 contribution. Please note that rates of income tax differ in Scotland, but the same principle applies. Find out how pension tax relief works.
    • From the 2023/24 tax year £60,000 can be invested into your pensions each year (including any tax relief and employer payments), or a sum equal to your annual income if lower.
    • However, high income earners get a lower annual allowance, which could limit their maximum contribution to as little as £10,000 a year. The rules on when this ‘tapered annual allowance’ kicks in are complicated but are only potentially an issue for very high earners.
    • There’s also a lower annual allowance of £10,000 for people that have started to access their pensions flexibly post-retirement age, for example by taking an income through drawdown. Lower earners and those with no income at all still get a minimum annual allowance of £3,600.

    Remember, the tax treatment of pensions depends on individual circumstances and is subject to change in future.

    Open a SIPP

    4. Consider whether you should use your CGT allowance

    Capital Gains Tax (CGT) is the tax you pay when you realise a profitable investment – unless it is in a tax efficient wrapper such as an ISA or pension.

    This 2023/24 tax year you can realise profits on investments of up to £6,000 free from CGT, but it is falling to £3,000 next tax year as things currently stand.

    The rates payable on Capital Gains Tax are 10% basic rate and 20% higher rate, but on residential property (other than your own home) the rates are 18% and 28% respectively. Your rate of capital gains tax will depend on your taxable income and gains combined.

    It’s not possible to carry the CGT allowance over to the next tax year. Therefore, if you are planning to sell assets that have gone up in value by more than your capital gains tax allowance it may make sense to split this over more than one tax year. CGT is not payable when assets are transferred to a spouse or civil partner, but they take on the overall gain when they come to sell.

    There may be opportunities to make use of the annual exemption if you hold investments in a general investment account by selling investments and purchasing them back within an ISA or a Pension. This way assets are transferred from a taxable environment to a tax free one.

    5. Think about inheritance tax

    Inheritance Tax (IHT) is a tax on the estate (the property, money and possessions) of someone who's died. It is currently payable at a rate of 40% on estates worth over a basic allowance threshold of £325,000.

    Married couples and Civil Partners can pass their thresholds between them meaning that there is normally nothing to pay on the first £650,000 of a joint estate. A ‘main residence’ allowance in respect of family homes under £1m in value increases this figure to £1m, though this extra allowance starts taper off for estates worth over £2m – and those over £2.7m have none.

    The simplest way to reduce the size of your estate, and a potential IHT bill, is to gift money to others, perhaps children or grandchildren to help them out financially. Gifts automatically exempt from IHT include an annual £3,000 lump sum, which can be given to one person or divided between a number of people, plus £250 a year to as many people as you like.

    How can I reduce my inheritance tax bill?

    Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

    Are you ready for Tax Year End?

    Find out how to save money each year with an ISA, SIPP, or Junior ISA.

    See more

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    Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus.

    The information in this article is based on our understanding of UK Legislation, Taxation and HMRC guidance, all of which are subject to change. The tax treatment of pensions depends on individual circumstances and is subject to change in future. This article is solely for information purposes and does not constitute advice or a personal recommendation.