In previous tax years I’ve talked about the only constant being change and it’s fair to say 2022 was no different, with my 5 key planning points being only 1 more than the 4 Chancellors we had in 2022.

Below are the five important things to remember when planning for the Tax Year End on 5 April: 

1. Use your ISA allowance

ISAs provide a tax efficient environment for your savings. The maximum investment that may be made during the 2022/23 tax year is £20,000. However, you should be aware that any unused investment limit cannot be rolled forward into next year – so make use of your saving limit before April.

2. Manage your investments

Investing in qualifying Venture Capital Trusts (VCT) will attract 30% income tax relief (maximum investment of £200,000) providing the investment is held for five years. Dividends are tax free and no Capital Gains Tax is paid on disposal. Whilst such investment may reduce your income tax liability, they are only suitable for clients with a high tolerance to risk who can afford to bear loss of capital, so seek appropriate professional advice before making an investment.

3. Maximise your pension contributions

Contributions to your personal pension plan attract income tax relief. The maximum contribution that may be made for 2022/2023 without incurring an income tax charge is £40,000. You may be able to make additional contributions if you have not used your allowances for the previous three tax years. Contributions must be made before 5 April 2023 if tax relief is to be claimed in 2022/2023.

Please note high earners continue to be impacted by the reduced annual allowance for those earning over £240,000. With the minimum pension amount for those high earners being reduced from £10,000 to £4,000 dependent on your earnings, so seek professional advice to determine if you are affected by the taper.

4. Capital Gains Tax

For 2022/23, capital gains up to £12,300 per person will not give rise to a capital gains tax liability. So, make sure you use your annual capital gain tax exemption before 5 April 2023, if appropriate, as any unused balance cannot be carried forward.

This point is particularly important this year as from 5th April 2023 we will see the Capital Gains Allowance reduce from £12,300 to £6,000 with a further reduction planned in 2024 to £3,000.

5. Inheritance Tax

If you are considering making gifts to family and friends in the near future, ensure that you have maximised your annual inheritance tax gift exemptions for this tax year. You may also utilise any unused part of the 2021/2022 exemption, but this will be lost if not used by 5 April 2023.  The annual gift exemption is £3,000.

Talk to your adviser

The above is a brief overview of some of the actions that you can take to reduce your tax liability, however there are other options available that you may want to consider for your own personal situation. As always, we recommend that professional advice is sought with your financial planner before taking action.  Get in touch with the Johnston Carmichael Wealth team. 

Tax reliefs and allowances are those that apply at 12 January 2023 and are subject to change in the future. The benefit of these to an individual are dependent upon your personal circumstances.

This article if for information purposes only and should not be construed as an individual recommendation.

Disclaimer: While all possible care is taken in the completion of this blog, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm.