Tax year-end: Four ways you could put your financial future on a firm footing

With the end of the tax year next week, it’s time to seize the moment. Here are four personal allowances you shouldn’t miss.

It’s always a good idea to take advantage of your annual tax reliefs and allowances wherever you can. But this year, it’s more important than ever, as Chancellor Jeremy Hunt has recently announced reductions to a number of key allowances as part of his attempts to shore up the nation’s finances. What’s more, no matter what your personal circumstances are, the cost-of-living crisis is beginning to bite.

With so many other aspects of our lives changing on an almost daily basis, making the most of your 2022/23 annual allowances and tax reliefs before tax year-end on 5th April 2023 is therefore one of the most practical steps you could take to tackle those tax rises and bring your tax bill down.

Here are the ‘big four’ personal allowances not to miss out on. Remember, the majority of these allowances work on an annual basis – use it or lose it!

  1. Your £20,000 ISA allowance
  • The ISA tax-free allowance remains at £20,000, so it makes sense to put away as much as you can afford since you don’t pay Income Tax or Capital Gains Tax on any growth received.
  • Use it or lose it – top up your ISAs before the end of the tax year or you’ll miss out.
  • Opening a Junior ISA means you can save up to £9,000 for your children or grandchildren, helping to get them off to a great start later down the line.
  1. Your pension allowance
  • Using your full pension allowance – up to £40,000 in a single tax year or 100% of your earned income, whichever is lower – can make a big impact on your financial well-being in later life.
  • And if you’re over the additional taxpayer threshold, a timely pension contribution before tax-year end could bring you back down below the threshold again (more on that later!).
  • HMRC will let you carry forward any unused allowances from the three previous tax years – starting with the earliest tax year first. So top up your pension before 5th April if you can afford to.
  1. Your £3,000 gifting allowance
  • If your beneficiaries will likely pay Inheritance Tax (IHT) when you die, you may also want to think about using your gifting allowances.
  • Using your annual tax-free gifting allowance of £3,000 means that you’re reducing the overall value of your estate when it comes to the final tally of IHT.
  • Plus it’s back-datable. You can carry the allowance over for one tax year, meaning you could give away up to £6,000.
  • Even if you give away more than that, the amount will become IHT-exempt if you survive for seven years.
  • There are also separate allowances for wedding gifts to family members, but they aren’t annual.
  1. Your Capital Gains Tax allowance
  • If you’re planning to sell investments or assets, the changes to Capital Gains Tax or CGT this year are particularly relevant to you.
  • This is the last year that you’ll be able to claim the full £12,300 CGT allowance, which is the amount you can make before you start paying tax. Following the Chancellor’s announcement in the Autumn Statement, the CGT allowance will be more than halved to £6,000 from 6th April 2023, before it halves again in 2024/25 to just £3,000 a year.
  • There are a number of steps you could take to mitigate a CGT bill, including selling off assets over several tax years and taking advantage of your spouse’s allowance.
  • With such significant reductions to the allowance looming, investors with high-ticket assets to sell should check in with a financial adviser and start planning ahead.

Using your personal allowances can help lay the right foundations for your financial future. To help you stay on top of your finances this spring, we’ve created a tax year-end checklist:

Tax may, understandably, not be top of your immediate to-do list when you’re a business owner or self-employed professional. But the reality is that not paying attention to it could result in material financial harm.

There are some key updates to be aware of in 2023 – and how they could impact your decisions going forward. Contact us today to find out more.

Seize the day

The valuable tax reliefs and allowances on offer can help to give us and our families that much-desired long-term financial security. But, with so many moving parts, having to make tax-smart, informed decisions can be daunting.

But, with 5th April just around the corner, it’s time to act now and do something practical to help your short- and long-term financial well-being.

A professional adviser can help. Don’t hesitate to get in touch on 01444 244551 or before 5th April 2023.

The value of an investment with St. James’s Place will link directly to the performance of the funds selected and may fall as well as rise. You may get back less than you invest.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Any tax relief over the basic rate on pension contributions is claimed via your annual tax return.

Although anyone can contribute to an ISA for a child only the parent/legal guardian can open the ISA for them.

Wellesley is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives. Wellesley is a trading name of Wellesley Investment Management Ltd.