So many people are not aware of the allowances and reliefs available for all taxpayers. We don’t get much for free in life, so it’s worth making the most of these in case you and your family can financially benefit.
What are the opportunities available to you?
Read on to find out more...
Personal Income Tax Allowance
The personal allowance for tax year 2023/24 is £12,570, meaning you can earn up to this amount without paying any tax. This allowance can be used against your State Pensions, plus any income which you are drawing down from your private pension arrangements, as well as your other investments or cash savings which are liable to income tax.
However, if you earn over £100,000, the personal allowance reduces by £1 for every £2 above £100,000.
And if you earn £125,140 or more, it is lost completely and income tax will be paid on ALL of your income...
If you are affected by this, it is worth considering making pension contributions or charitable donations to reduce your tax liability.
Starting Rate For Savings
The starting rate for savings means you can earn up to £5,000 (for the tax year 2023/24) from savings before you pay any tax.
This was to help those on lower incomes, so the £5,000 is reduced by £1 for every £1 of income you earn over the annual allowance.
However, combined with the personal allowance of £12,570, it means you could earn up to £17,570 a year tax free in savings across both.
We can discuss with you how you can enjoy flexibility around your income.
For example, if you are drawing down income from your pension, it may be possible to suppress this income in a tax year if you needed to encash an investment bond, where the gains are categorised as savings and could make use of this allowance.
Saving Allowance
Thanks to the ‘personal savings allowance’, savers have been able to grow their money tax free since April 2016.
This allowance means you can earn up to £1,000 interest tax-free if you’re a basic-rate (20%) taxpayer, or £500 if you’re a higher-rate (40%) taxpayer.
However, if you earn more than £125,140 each year, you’ll pay tax on all your savings. You don’t receive a personal savings allowance.
Using the savings allowance against any cash savings you have, including your emergency fund, could generate tax free income for you.
And if you are a higher or additional rate taxpayer, consider tax planning opportunities which could bring you into a lower bracket and save you money. We can advise you further on this.
To find out more about tax allowances and how you can make the most of them, please get in touch for an appointment to discuss your bespoke options. Appointments are either virtual, or in our offices located in Polegate, East Sussex.
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
