[New] Tax freezes and reductions impact on individuals

25 per cent from 1 April 2023, it will become more expensive for company distributions to be made.

For many years dividends have been a more efficient remuneration strategy than bonuses or salaries. At Burgis & Bullock we think that the next 12 months may see an increased focus on highlighting more efficient remuneration strategies, such as now paying greater salaries, to counteract the changes made by government.

Of course, there are a wide range of factors to consider for owner-managers in deciding how to remunerate themselves.

The Capital Gains Tax allowance is also set to be reduced from £12,300 to £6,000 from April 2023, and then halved again. This will restrict individuals that look to gift assets to utilise their annual exemption. The Chancellor confirmed that the thresholds for inheritance tax (IHT) will be frozen until April 2028. This means they will stay at the current rates of £325,000 for the main threshold, and £175,000 for the main residence threshold.

This ultimately means that the main band has been the same for 18 years and has not increased since 2009/10. In that time the value of residential property has soared, and with it, the value of people’s estates, meaning more will be within the scope of IHT.

But this doesn’t stop at property. It will also impact people who have other assets such as investments and savings.

It will also be of interest to those who are exit planning and looking to sell their business. A business will typically attract IHT relief and therefore not be such an issue.

However, in many cases upon a sale, the business is converted into cash, and at that point no longer benefits from the previous IHT relief. The cash is added to the estate and potentially be subject to IHT at 40 per cent.

There are a whole host of measures that you can look to implement to negate the impact of IHT, from gifting and selling assets, to the use of trusts, gifts out of income and gifts out of capital.

At Burgis & Bullock, our dedicated tax planning team is on hand to help leave a lasting legacy for our clients to their families. It’s vital to carry out a review of total wealth and structuring to ensure the maximum amount possible is passed on to the next generation.

Burgis & Bullock are Chartered Accountants who offer more than basic accounting services. If you’d like to deal with a local firm who are not interested in history, but are more focused on your future, your business growth, your ambitions, planning you retirement and making sure your assets are adequately protected – you need to talk to us. With over 130 years of experience helping Warwickshire businesses, our team of specialists are committed to your success.