KEY GUIDE | Month 20XX | Folio Title Folio Title Folio Title Folio Title 3 Income tax saving opportunities SPECIAL REPORT | December 2023 | Year End Financial Plann ng make better use of this limit. You can also receive £1,000 of savings income tax free if you are a basic rate taxpayer, and £500 if paying tax at the higher rate. There is no such allowance for additional rate taxpayers. If you have little or no earnings or pension income, you might benefit from a 0% tax rate on up to the first £5,000 of taxable savings income. Again, shifting assets between a couple can help minimise tax. A £1,000 tax-free allowance is available for income from property, such as where a parking space is let out, so joint ownership could result in a modest tax saving. The marriage allowance allows individuals who are nontaxpayers to transfer 10% of their personal allowance (£1,260 in 2023/24) to their spouse or civil partner, providing the intended recipient pays tax at no more than the basic rate. The allowance is not automatic, so it needs to be claimed initially. It will then remain in place until you cancel it. You can backdate claims for up to four tax years, i.e. back to 2019/20. Useful link: www.gov.uk/marriage-allowance – how it works and how to apply. Child benefit Where an individual or their partner has income (less certain deductions) of £50,000 or more then child benefit is effectively reduced by the High Income Child Benefit Charge. This is a 100% reduction if income is over £60,000, and a prorata reduction for income between £50,000 and £60,000. Individuals may be able to overcome this by using salary sacrifice or by making pension contributions and/or charitable donations to bring income below these limits. Couples have the additional option of transferring income between partners. If you’re in a couple, switching income from one spouse or civil partner to the other can help save money. Everyone should make sure they use their personal allowance (a maximum of £12,570) and, as much as possible, reduce income charged at higher or additional (top) rates. Two important thresholds to watch are: ● Income over £125,140 is taxed at 45%, or 47% for nonsavings, non-dividend income in Scotland. This threshold is frozen (outside Scotland) until April 2028 for all income. ● The personal allowance is withdrawn where income (less certain deductions) is more than £100,000. If salary sacrifice is an option through your employer, consider using it or think about increasing your pension contributions. If affordability allows, both of these actions can reduce the amount of income tax paid at the higher or additional (top) rates and prevent or reduce the withdrawal of the personal allowance. Couples might be able to transfer income-producing investments between themselves to avoid exceeding one of these limits and to reduce their combined income tax bill. As only income received after a transfer will benefit, prompt action may well be needed if there is to be any benefit in 2023/24. Capital gains tax (CGT) may be payable on switching ownership of an investment if you are not married or in a civil partnership. Everyone can receive £1,000 of dividends tax free in 2023/24, regardless of their tax status, but this is halving to £500 in 2024/25. For couples, reorganising your shareholdings may Credit: Unitone Vector\shutterstock.com
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