Lester Aldridge Life Matters for Lymington: preparing for end of year tax

Preparing for End of Tax Year 2022/2023

Lester Aldridge Life Matters for Lymington: noteworthy points from the The Chancellor's Autumn Statement to help us in planning for the end of the tax year in April

As we enter January, the end of UK’s tax year on 5 April 2023 is fast approaching. The Chancellor’s Autumn Statement released in November 2022 provided a number of tax announcements which will affect many of us in planning for the end of tax year.

This month the Lester Aldridge feature article in the "Life Matters for Lymington" series provides some guidance for us as we embrace this task!

 

 

 

Alarm clock with post it note tax time

The key noteworthy points from the Autumn Statement and ways to plan for the upcoming end of tax year are set out below.

Inheritance tax (IHT)

The Autumn Statement confirmed that the Nil Rate Band (NRB) allowance will be frozen at £325,000 until 6 April 2028. The Residence NRB will also remain frozen at £175,000 until April 2028.

The further freezing of the NRB allowances will continue the fiscal drag effect of pulling more individuals into the IHT net as more people’s estates exceed their NRB allowances, incurring an IHT liability.

It is therefore advisable to make use of your annual gift allowance of £3,000 per annum or £250 to as many people as you wish in each tax year. If you haven’t used your £3,000 exemption from the one tax year before (2021/22), you can carry this forward to the present tax year to double the allowance to £6,000.

Income Tax

Updates from the Autumn Statement:

  • Personal allowance of £12,570 frozen until 6 April 2028
  • Higher rate tax threshold of £50,270 also frozen until 6 April 2028
  • Threshold for additional rate reduced from £150,000 to £125,140
  • Income tax rates remain the same: basic rate 20%, 40% higher rate and 45% additional rate
  • Annual dividend allowance cut from £2,000 to £1,000 from 5 April 2023 and then cut further to £500 from April 2024, but no reduction on the dividend tax rates (basic rate 8.75%, higher rate 33.75% and additional rate 39.35%)

With rising salaries and State Pensions to accommodate for the rising cost of living, more people will exceed the personal allowance or have more income pushed into higher rates of tax because of the frozen thresholds. It is therefore advisable to consider maximising ISA allowances or, if you’re working, pension contributions, so as to help reduce your taxable level of income within existing thresholds.

Capital Gains Tax (CGT)

The Autumn Statement provided the following updates in relation to CGT:

  • CGT annual exemption to be cut from £12,300 to £6,000 in April 2023 and further cut to £3,000 in April 2024
  • Rate of CGT remains the same (basic rate 10%, higher rate 20% for non-residential property disposals and 18% in the basic rate band and 28% in the higher rate bands for disposals of residential property).

If possible, it may be worth considering timing the disposal of any assets prior to the CGT exemption being cut, to lessen your CGT liability.

SDLT

The Autumn Statement established that the SDLT cuts announced in the infamous mini-budget in September 2022 will remain until 31 March 2025. The first £250,000 of a property’s purchase price will continue to be 0% SDLT (or, in certain circumstances, 3% if buying a second residential property) and the nil-rate threshold for first time buyers will be up to £425,000. The maximum purchase price for which First Time Buyers Relief can be claimed will be £625,000.

This was notably one of the only parts of the mini budget kept in place.

The additional 3% surcharge rate of tax remains through all SDLT tax bands for purchases of second residential properties, subject to a few reliefs in certain circumstances.

Summary

The Chancellor’s approach is aimed to improve public finances by a projected £55 billion to help address the ‘very big deterioration’ in public finances.

Despite taxation rates not increasing, the freezing of various allowances and thresholds will resemble an increase in tax rates, as rising wages, pensions and inflation will result in fiscal drag pulling more people into higher rates of tax. This allows the Government to state that they are not increasing rates of tax, whilst still increasing tax revenues.

It is worth noting however, that when asset values fall, be it stock market investments or property, this can be considered a good time to undertake estate planning since lower asset values mean more ‘value’ can be given away with potentially less IHT and CGT consequences. It is always sensible to obtain advice and here at Lester Aldridge, we have an experienced and dedicated team of Private Client lawyers to assist you in this process.

For more information and advice, please contact Lester Aldridge to speak to one of our experienced tax, trusts, wills and probate solicitors at This email address is being protected from spambots. You need JavaScript enabled to view it. or call on 01202 702612.

Natasha Mallet, Lester Aldridge Solicitors

This article was written by Finola Whelan, Trainee Solicitor at Lester Aldridge and was edited by Kurt Lee, Partner.

About Lester Aldridge Solicitors

Lester Aldridge Solicitors are based in London, Southampton and Bournemouth - where the office covering the New Forest is situated conveniently close to the main Bournemouth train station. Their specialist teams in the various fields of law will be happy to advise and assist you, starting with a completely free initial consultation during which you can decide whether you feel able to trust them with your confidential information. Consultations are also available via virtual meetings : advice is available through phone, email, Skype and Zoom.

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Life Matters is a regular monthly feature on Lymington.com, which covers a wide range of legal subjects and is always written by one of the Lester Aldridge team.

You can see a list of all published articles by clicking to the Lester Aldridge Solicitors webpage on Lymington.com here.

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