Keep up to date on all the recent adjustments that might affect your tax affairs, here on TaxGem’s Tax blog.
Knowledge is power, with knowing the changes, you can appoint us as your tax advisors to mitigate any tax inefficiencies the updated policies may bring in.
We saw the previous chancellor announce he will be implementing a 2% reduction in the main employee national insurance contributions. This represents a saving of up to £750 for employees.
We also saw class 4 national insurance for self employed tax payers reduce from 9% to 6% and class 2 national insurance abolished!
This represents a saving for the self employed of £1,130 and £179 respectively.
The personal allowance, tax bands and tax rates remain unchanged for employed and self employed tax payers.
Dividend and Savings Income
Dividend income
The dividend allowance has been reduced from £1,000 to £500. This represents a tax increase of £43 for basic rate tax payers and £168 for higher rate tax payers.
It may be time to explore more favourable methods of extracting profits from the limited company.
Savings Income
The savings income allowances have remained unchanged but lets refresh!
£1,000 taxed at 0% for basic rate taxpayers
£500 taxed at 0% for higher rate taxpayers
£0 taxed at 0% for additional rate taxpayers
Pension Contributions
This year we have seen a lot of positive changes to the pension tax regime.
Lifetime allowance? Gone. This means there is no limit on the total amount you can accumulate in your pension without incurring extra tax charges.
The annual allowance for pension contributions is £60,000. If you didn’t use all of this last year and had a pension set up, you can carried the unused amount forward. This can represent a substantial tax saving for many.
Despite the positive pension changes, there has been a change to the tax free lump sum that a tax payer can extract from their pension.
This has changed to the lower of £268,275 or 25% of the total pension value. So the maximum tax free amount is £268,275, anything after this will be subject to an individuals marginal rate.
Get in touch today with our financial planning branch SilverGem to set up your pension today!
ISA
Do you want to be able to invest an additional £5,000 per year in a tax efficient way?
The government are introducing a new UK based stock and shares ISA that will facilitate individuals invest £5,000 on top of the £20,000 ISA allowance.
Capital Gains Tax
The capital gains annual exemption has reduced from April 2024 from £6,000 to £3,000.
However, the capital gains tax rate on the sale of assets, for those who own capital in properties, will reduce from 28% to 24% for higher rate taxpayers.
Please see below a computation on how the changes in the higher rate capital gains tax and annual exemption affect the capital gains tax payable on a £100,000 gain on a sale of an investment property.
