Our latest guide: 7 allowances and exemptions you may wish to use before the end of the 2023/24 tax year

The 2023/24 tax year will end on Friday 5 April, and when it does, several key financial allowances and exemptions will reset. Most of these are “use it or lose it”, meaning you can’t roll over any remaining allowance or exemption that you haven’t used up.

As the tax year end approaches, it may be helpful to review the following allowances and exemptions and make the most of them before they reset on 6 April 2024. Fortunately, our new guide offers in-depth insights into how these allowances work and why it may benefit you to use them.

Keep reading for a summary of the guide, and find out how to access it for free here.

1. Marriage Allowance

If you are married and one spouse earns under the Personal Allowance of £12,570 a year, they can transfer some of their own Personal Allowance over to the higher earner.

This can make your combined earnings more tax-efficient, as more of your joint earnings would fall into the tax-free Personal Allowance.

Couples’ financial planning can be hugely constructive, so if you would like to maximise your use of the Marriage Allowance in the 2023/24 tax year, find out more in our free guide below.

2. ISA Allowance

Individual Savings Accounts (ISAs) could be a highly tax-efficient way to save and invest your money. Gains you make within these accounts are usually free from Capital Gains Tax (CGT) and Income Tax.

There is a £20,000 saving and investment limit across all the ISAs you hold in 2023/24, with some additional limitations applied to certain accounts. This £20,000 contribution limit will reset on 6 April, so placing as much as you can into your ISAs before the end of the tax year could help you save more wealth tax-efficiently in the long term.

There are five different types of ISA for adults, each with their own regulations and benefits, which you can read about in our guide.

3. JISA Allowance

A Junior ISA (JISA) allows you to invest on behalf of your child, and they can access the funds when they turn 18, at which point the JISA becomes an ISA in their name.

In our guide, we explore:

• How a JISA could help your child get ahead in life
• The other options available for investing on behalf of a child
• The ins and outs of subscribing and contributing to a JISA.

The “use it or lose it” JISA allowance stands at £9,000 in the 2023/24 tax year. This does not count within the £20,000 ISA contribution limit for adult accounts.

4. Dividend Allowance

If you own a business, or have shares in another company, you may take dividends as part of your remuneration.

The Dividend Allowance is the amount a person can earn in dividends before paying Dividend Tax. In the 2023/24 tax year, the Dividend Allowance is £1,000, and is set to reduce to just £500 in 2024/25.

So, if you are able to, making the most of your Dividend Allowance before 6 April could improve your tax efficiency.

5. Capital Gains Tax Annual Exempt Amount

You might pay CGT on profits from the sale of certain assets, including your second home and some business holdings.

If you plan to cash in on several assets in the coming years, making the most of your CGT Annual Exempt Amount, which is the amount under which you can earn profits without paying tax, may help. The Annual Exempt Amount is £6,000 as of 2023/24, but it is being reduced to just £3,000 in 2024/25.

Our handy guide can help you with:

• The types of assets that incur CGT
• The rate of CGT you are likely to pay.

Even if you have never had to pay CGT before, the Annual Exempt Amount reduction could mean many people pay it for the first time in 2024/25, so learning about this tax now could be extremely helpful.

6. Pension Annual Allowance

If you are still making pension contributions, there is an Annual Allowance that marks how much you can pay into your pensions every year while receiving tax relief.

As of the 2023/24 tax year, the Annual Allowance stands at £60,000 for most earners.

While there used to be a Lifetime Allowance (LTA) that limited your overall tax-efficient pension savings, this is set to be abolished in April. As such, you may be able to pay even more into your pension tax-efficiently than you previously thought.

In our guide you will learn about how the Annual Allowance works, the tax relief you could receive on contributions, and what the abolition of the LTA could mean for your lifelong pension savings.

7. Inheritance Tax annual exemption

Finally, the Inheritance Tax (IHT) annual exemption lets individuals give financial gifts of up to £3,000 a year without this money forming part of their taxable estate when they pass away.

In other words, you could give away up to £3,000 in the 2023/24 tax year and reduce the value of your estate before you die, potentially decreasing the IHT bill your loved ones pay later.

The rules around gifting and IHT are extremely complicated. In the guide, you’ll find out about:

• The ins and outs of the £3,000 gifting rule
• Other gifting rules you may wish to be aware of
• Additional methods of reducing IHT.

Even if you feel that it’s “too soon” to worry about IHT, preparing your estate as early as possible may have significant financial benefits for your family later.

Download our free guide to find out more about using your tax-efficient allowances before 6 April

Click here to download our free guide, which offers in-depth insights into these allowances.

To discuss any of these elements with a Financial Planner before the tax year ends, email us at enquiries@pen-life.co.uk, or call 01904 661140.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.