The new tax year is underway and with a new set of allowances available, clients now have the opportunity to look at their investments afresh and come up with a plan for the tax year ahead.
Here we look at four ways to get ahead for the 2023/24 tax year.
One method of funding investments is to make regular contributions. With the pension annual allowance increased to £60,000 this tax year, clients may wish to spread their contributions over the course of the year so to maximise this allowance.
If you intend to utilise your Stocks & Shares ISA allowance of up to £20,000 during the tax year, arranging to make monthly payments into your Stocks & Shares ISA could be a sensible way to manage cash flow.
If you are able to do so, there is certainly an argument to contribute to ISAs and pensions early in the tax year, rather than waiting until the end. Not only does this give you peace of mind that you have everything organised, but you will also have almost a years’ worth of time for the investment to potentially grow in value.
Consider the new rules
The chancellor’s Spring budget brought about a number of changes concerning pensions. This includes the annual allowance increase, in addition to the scrapping of a Lifetime Allowance tax charge, followed by its abolishment. With such changes in mind, clients may wish to amend their pension contributions in order to take advantage of the greater allowances available.
Other changes to income tax, particularly the additional rate tax band and the tapering of the personal allowance for high earners over £100,000, may lead to some considering pension top ups as a way of reducing or negating their income tax liability.
Consider investments for family members
Whilst the scrapping of the Lifetime Allowance for pensions has created an opportunity to build a larger pension fund, the tax-free cash allowance remains fixed at 25% of the previous Lifetime Allowance for now. It may therefore be prudent to consider starting or building a private pension for a spouse, so that there are two pension pots to draw from in future, utilising two standard personal allowances and two tax-free cash allowances.
Gresham’s financial advisers can assist clients by devising a financial plan that helps achieve their personal goals and objectives. For tailored advice for your individual circumstances, please get in touch.