2022/23 Tax Planning Tips

We can help you get a head start on the race to complete your Personal Tax Returns. 

 

Whether you are Self Employed (Sole Trader), Landlord or running a Limited Company; we are here to keep you on track into easing your way through your submission. 

 

For the tax year 2022/23, the Personal Allowance and Income Tax rates and thresholds remain the same as 2021/22. The government kept the £12,570 personal allowance up until 2026, and the basic rate of income tax will remain 20%. However, the threshold for the highest rate of 45% tax will fall from £150,000 to £125,140. 

 

For companies, the main rate of corporation tax will rise to 25% from 1 April 2023 for companies with profits over £250,000. The corporation tax rate of 19% will remain for companies with profits below £50,000. Tapered marginal rates will apply for profits in between these two limits. 

 

 

1. Dividend Allowance – Shareholders will start to pay tax on dividend income in excess of £1,000 (previously £2,000) in 2023/24, and where it exceeds £500 in 2024/25. Therefore, it is worth considering utilising the current £2,000 dividend allowance before this runs out. Where dividends exceed the dividend allowance, the rates applying are 8.75% on income up to the basic rate band limit, 33.75% on income above the basic rate limit up to the higher rate band limit, and 39.35% (the dividend additional rate) on income above the higher rate limit. 

 

2. Capital Allowances – Time is running out to claim the super-deduction offering 130% first-year tax relief. The deduction is available to companies until March 2023. It is therefore important to consider this carefully before it is lost. Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances, for example Computer equipment and servers, Office chairs and desks. 

 

3. Capital Gains Tax (“CGT”) Annual Exempt Amount – It is time to review your investment portfolios to see whether the CGT Annual Exempt Amount can be utilised. The current amount of £12,300 for the 2022/23 tax year is being cut to £6,000 for the 2023/24 tax year (with further reductions in 2024/25). Any amount that is unused cannot be carried forward, so it is worth considering maximising this tax year’s Annual Exempt Amount. 

 

4. Gift Aid – Win Win for Both Taxpayer and Charities – if you donate through Gift Aid, the charity can claim an extra 25p for every £1 donated! 

If you make a charitable donation to a UK registered charity within the scope of a Gift Aid election, you can obtain Income Tax relief. 

If you are a higher or additional rate taxpayer, relief is available by extending your basic and higher rate tax bands by the grossed-up donation. It is important to note that the donor needs to pay sufficient tax to cover the charities reclaim from HMRC. 

Taxpayers can also make elections for a Gift Aid donation to be treated as made in the previous tax year. 

 

 

- Put company profits into your tax-free pension pot – withdrawing profit from your company by way of an employer’s pension contribution is highly tax-efficient, as the payment is not taxable on you (provided the annual allowance is not exceeded) but the company still gets tax relief on the contributions and there is no NIC to pay. 

 

- Private Pension Contribution - you should be considering contributing into your personal pension scheme to make use of the relief given on any amount contributed. Tax relief on pension contributions is limited to the higher of ‘relevant earnings’ or £3,600 per tax year. In addition, there are limits to the amount that the individual, employer or third party can contribute to their pension plans in a tax year - this is known as the annual allowance which is £40,000 for the 2022/23 tax year. 

 

Provided an individual was a member of a registered pension scheme in that year, it is possible to look back and use any unused annual allowance from the past three years and can be added to your allowance for the 2022/23 tax year – very useful! If you are a higher or additional rate taxpayer, your basic and higher rate tax bands will be extended by the grossed-up pension contributions. 

 

6. ISA Contributions – Income and chargeable gains arising within an ISA are free of income tax and CGT. Those who are UK resident and aged 18 or over can invest up to £20,000 into an ISA for the 2022/23 tax year. Parents can fund a junior ISAs up to £9,000 per tax year per child. Any unused allowance cannot be brought forward! 

 

 

- In an Enterprise Investment Scheme (EIS) and claim 30% income tax relief (the annual maximum investment is £1m or £2 million if at least £1 million of that is invested in knowledge-intensive companies. 

 

- In a Qualifying seed enterprise investment scheme (SEIS) and claim income tax relief at 50% (the annual maximum investment limit f or 2022/23 is £100,000 and due to increase to £200,000 from 6 April 2023). 

 

- In a venture capital trusts (VCTs) – it is higher risk than many other investment choices as VCTs are required to invest in smaller companies that are not fully listed, however, they offer a range of tax benefits. Income tax relief at 30% is available on qualifying investments of up to £200,000 and dividends received from the units are tax-free. In addition, the VCT can buy and sell investments without suffering CGT within the trust and there is no CGT payable on any gain made when you sell the VCT units. 

 

 

Tax treatment will depend on your individual circumstances and may change in the future. The above summary has been prepared for information purposes only and it should not be relied upon in making decisions. 

 

If you require assistance or tax advice, please contact a member of our team on 0333 772 7753 or email [email protected]