As the 2022/23 tax year comes to a close, it’s important for individuals and businesses to start thinking about tax planning for the upcoming 2023/24 tax year. The Chancellor’s recent Autumn Statement, delivered on November 17th, 2022, included a number of changes to the tax system that may impact your tax planning strategies.

One of the key announcements in the Autumn Statement was the freezing of the personal allowance for Income Tax for five years. The personal allowance is the amount of money an individual can earn before they start paying Income Tax. For the 2023/24 tax year, the personal allowance will remain at £12,570.

It was also announced that there would be a reduction to the tax-free dividend allowance for 2023/24 onwards.

Furthermore, the starting point for the tax band for the additional rate tax of 45% will be reduced from £150,000 to £125,140 from 6 April 2023. This will mean that a lot more higher earners will be subject to paying the 45% Income Tax rate.

Another announcement in the Autumn Statement was a freezing of both the National Insurance contributions (NICs) threshold and the rate of NIC for five years.

In addition to these freezes, the Chancellor also announced a freezing of the Inheritance Tax (IHT) threshold. The IHT threshold is the amount of money an individual can pass on to their heirs tax-free. For the 2023/24 tax year, the IHT threshold will remain at £325,000.

The Autumn Statement also included a number of changes to the Capital Gains Tax (CGT) system. CGT is the tax that individuals pay on the capital gains (profits) they make when they sell assets such as property, shares, or investments. Additionally, the Chancellor announced that the CGT annual exemption will be reduced from £12,300 to £6,000 for the 2023/24 tax year and £3,000 for the following tax year. These changes may impact the tax bill for individuals when they sell assets.

Finally, the Chancellor also announced a number of changes to the business tax system. One of the key changes was an increase in the Corporation Tax rate from 19% to 25% for the 2023/24 tax year. This means that some businesses will pay more tax on their profits. Additionally, the Chancellor announced a number of measures to crack down on tax avoidance and evasion, including the introduction of a new digital services tax. These changes may impact the tax bill for businesses, and they should be aware of them when planning their tax strategy.

Overall, the Chancellor’s Autumn Statement included a number of changes to the tax system that may impact your tax planning strategies for the 2023/24 tax year. It’s important to be aware of these changes and to plan accordingly to minimise your tax bill. Consulting a tax professional, financial planner or accountant can be helpful in developing a tax plan that takes into account the recent changes in the tax system.

This was without a doubt a tax raising Budget because with inflation currently at 10.5% at the time of writing, the effect of freezing or reducing tax allowances and tax bands is to effectively increase taxation by at least 10.5%. As most of these tax freezes and reduced allowances/bands will last 5 years whilst inflation is high, means that these tax increases will in fact be huge unless inflation reduces to 2% or less which is unlikely so tax planning is now more important than ever.

So it is vital for you to maximise your investment in all available tax-free or tax-deferred investments as much as possible and, if you are a couple, in both of your names. You should also seek to maximise your available tax reliefs and allowances. There are far more available than you realise.

If you have the flexibility to adjust your income and benefits mix for tax purposes, especially if you are a business owner, then you should take professional advice on how to do so. Be prepared to pay a fee which may be hefty but as long as the tax savings far outweigh the professional fees then surely it is worth it, isn’t it?

Whatever you do, take action. Otherwise, inaction could seriously erode your wealth over the next five years. You know it makes sense.*

*Risk warnings

The Financial Conduct Authority does not regulate tax planning. The information contained within this blog is for guidance only and does not constitute advice which should be sought before taking any action or inaction. The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. This blog is based on my own observations and opinions.

Tony Byrne

Chartered and Certified Financial Planner

Managing Director of Wealth and Tax Management

If you are looking for expert guidance in Financial Planning contact Wealth and Tax Management on 01908 523740 or email wealth@wealthandtax.co.uk