As ever you need to factor in a mix of freezes and changes. There are no changes to: ■ The personal allowance, frozen at £12,570 since 2021/22. ■ The point at which the personal allowance begins to be tapered away which remains at £100,000, where it started 15 years ago. ■ The higher-rate threshold (£50,270 in England and £43,662 in Scotland), which also remains at the same level since 2021/22. The tax changes from 6 April 2025 include: ■ A lower starting point of £5,000 for employer’s national insurance contributions (NICs). ■ A higher rate of employer’s NICs. ■ An increased rate of 14% for Business Asset Disposal Relief. The main capital gains tax (CGT) rates rose to 18% for basic-rate taxpayers and 24% for other taxpayers from 30 October 2024. The annual exempt amount remains frozen at £3,000. Both the freezes and the changes will produce more revenue for the Exchequer, which makes them important areas to consider in your newyear tax planning. PERSONAL ALLOWANCES Ideally your start-of-year planning should begin with an estimate of your gross (pretax) income – not just earnings – over the next 12 months. If that is below the tax-free personal allowance, then look at the options for increasing your income by, for example, rearranging investment holdings with your spouse/civil partner. If you still cannot reach £12,570 and your spouse/civil partner is a basic rate taxpayer, it may be worth claiming the Marriage Allowance. This could jointly save you up to £252 in 2025/26. At the opposite end of the scale, if your income exceeds £100,000, then you may lose part or all of your personal allowance. Here, tax planning can help to reduce your gross income. There is a range of ways that this can be achieved, including making pension contributions or restructuring how you hold your investments. You could also transfer investments to your spouse/civil partner, provided you’re not complicating their tax position. HIGHER-RATE TAX The Office for Budget Responsibility estimates there will be 6.6 million higher-rate taxpayers in 2025/26, over 2.1 million more than in 2021/22. If you’re a member of this rapidly growing club, then the principles of income reduction – and thus tax saving – are broadly the same as for limiting the personal allowance taper. SHAREHOLDER DIRECTOR NICS The change to NICs will affect you if you’re a shareholder director as it will increase the cost for your company of paying your salary and bonuses. Even if your salary is only enough to cover the personal allowance, your company’s NICs outlay could rise by £657 a year. However, the alternative of drawing dividends is not 4 A new tax year starts on 6 April. What actions should you take now to get 2025/26 off to a good start? Start planning now for the new tax year TAX
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