Recap before the Tax Year End


As tax-year end approaches (just 8 weeks to go!), we thought it might be handy to recap the things set to change in 6th April in case you might have missed them; some might benefit from you taking action ahead of time.

The main points affecting our clients are as follows:

It is also worth noting the CGT exemption and Dividend Allowance are set to halve again in April 2024.

Given the above, those that have accrued large capital gains may wish to ensure they realise enough gains to take full advantage of their annual exemptions for the current tax year (but please check with Lexington first, as you may have already used this allowance via the investments we look after for you).

If your only taxable investments are held with Lexington, we will check nearer the end of the tax year and contact those with substantial unused exemptions.

You can realise gains by selling shares, giving them away, or transferring them into an ISA or pension.

Strategies for reducing a CGT liability include:

However, each of the above require some degree of administration so it is important to act before you run out of time.

For dividends, the reduced allowance could increase your tax bill next year by as much as £394. If your taxable dividends come from investments, you could consider moving those investments into pensions or ISAs (if you have sufficient allowances available), or you could swap to investments with lower dividend yields; the dividend yields on Lexington portfolios are minimal.

If your dividends come from your own company, you can refer to our previous article which covered how the changes might affect how you choose to extract profit in the future. This article can be found here.

For Corporation Tax, the main rate will apply to profits above £250,000. There will be a ‘small profits rate’ of 19% for companies with profits under £50,000, with a marginal relief on the main rate for companies with profits between £50,000 and £250,000. You would need to speak to your accountant for more detail on how this affects your company and what you could do about it (N.B. contributions to your pension may be one way to reduce your taxable profits).

Unfortunately, the things that won’t change include the Personal Allowance, Basic Rate band, ISA Allowance, the Nil Rate Bands, or the Annual Allowance or Lifetime Allowance for pensions; this creates the ‘fiscal drag’ which forms part of the Chancellor’s plans to reduce borrowing and cut inflation via fiscal policy.

If you wish to discuss how these changes might impact your own finances, please contact Lexington.

Article by Lewis Pollexfen CFP