HAPPY (?) NEW YEAR

The new tax year is now upon us.

Frozen tax thresholds will see more taxpayers pay higher rate tax of 40% tax this year, whilst dividend allowance and capital gains tax allowances are reduced.

Clive Haworth Senior Manager clive.haworth@etctax.co.uk

Personal tax rates

Personal allowances and higher rate thresholds are frozen until 2028 at £12,570 and £50,271 respectively.

The additional rate threshold will be lowered from £150,000 to £125,140 from 6 April and this is the income level at which an individual will not have any personal allowance, because £1 of the personal allowance is withdrawn for every £2 of income above £100,000.

Dividend tax

The dividend allowance is reduced from £2,000 to £1,000 from 6 April 2023 (and then to £500 from next year).

This reduction will mean many retired people having to engage with HMRC for the first time to notify investment income.

Capital gains tax

A cut in the capital gains tax allowance mean that taxpayers will start paying tax on gains in excess of £6,000 (down from £12,300). This allowance will be reduced further to £3,000 in 2024-25.

The rates of capital gains tax remain unchanged at 10% basic rate and 20% higher rate, but on residential property, apart from primary residences, the rates are 18% and 28% depending on earnings bracket.

Tax returns – filing deadlines and some key dates

Now the 2022/23 tax year is behind us, tax returns for that year can start to be completed and filed with HMRC. In practice it is likely to be several weeks before all the relevant information is available to enable the tax return to be completed.

The deadline for filing tax returns are set out. However, the enquiry window (during which HMRC can routinely enquire into a tax return) runs from 12 months from the date of filing, not from the latest filing dates.

31 July 2023

Also from 6 April 2023, there are significant changes to the rules that apply to transfers of assets between spouses and civil partners who are in the process of divorcing or separating. The changes will take effect for disposals made on or after 6 April 2023.

Spouses or civil partners will be given up to three years, after the year they cease to live together, to make no gain or no loss transfers of assets, and unlimited time when the assets are the subject of a formal divorce agreement. Prior to 6 April the time limit was the year of separation.

A spouse or civil partner who retains an interest in the former matrimonial home will also be given an option to claim private residence relief when it is sold.

Pensions

As widely reported, the Lifetime Allowance has been abolished so there is now no cap on the value of a pension fund before a tax charge arises.

The annual amount that can be paid into pension is also increased from £40,000 to £60,000.

The money purchase annual allowance (MPAA) limit has been increased from £4,000 to £10,000. This means that anyone who has drawn from their pension but is still working will be able to contribute more into their pension.

Second payment on account due for the 2022/23 tax year. If your tax return is already prepared you may have less tax to pay on this date so it may be worth submitting your tax return before 31 July to avoid overpaying tax to HMRC

5 October 2023

If you need to complete a tax return for the first time for 2022/23 (for example you have commenced self employment) you need to notify HMRC, and penalties may apply for late notification.

31 October 2023

31 January 2024

5 April 2024

Deadline for submitting a paper tax return to HMRC. This is also the deadline to amend the previous year’s tax return online if you need to.

Deadline for submitting an online tax return to HMRC.

If you have an ISA ensure you have maximised the amount you can put into your ISA by this date.

If you have any queries or question please get in touch, our experienced team of tax advisers will be happy to assist.