January Newsletter

NEW YEAR TO SAVE TAX

As we head into the second week of 2023, hopefully, some of your New Year’s resolutions are still intact, but if you have already broken them or you are yet to make one (or several), planning your tax affairs could be a great place to start.

Good money management habits can make you feel more in control of your finances, which in turn will help to make long-term goals become much more achievable. It is important that you give yourself enough time to get into smart tax planning habits before the end of the tax year in April.

An obvious tax planning point would be to maximise your ISA allowances for the 2022/23 tax year (currently £20,000 each).

You might also want to consider increasing your pension savings before 5 April 2023, as the unused annual pension allowance from 2019/20 lapses after three years.

Are you aware of the allowances available to you? Did you know that you can make up to £3,000 worth of gifts in a single tax year that won’t be counted as part of your estate when it is time to pay Inheritance Tax? Talk to us to see how to make the best use of your tax allowances before the end of the tax year.

£12,300 CGT ANNUAL ALLOWANCE – USE IT OR LOSE IT!

The Capital Gains Tax (CGT) annual exempt amount reduces from £12,300 to just £6,000 for gains made in 2023/24.

Remember that the 2022/23 allowance is lost if not used by 5 April 2023 and you might want to consider bringing forward disposals of chargeable assets where possible. 

Where a married couple who are higher rate taxpayers own a buy to let property, bringing forward the disposal from 2023/24 could potentially save £3,528 CGT (£24,600-£12,000 @ 28%).

It would be important to exchange contracts before 6 April 2023 as that is the critical date for CGT.

Get it touch with us to find out how we can help you to get the most out of your allowance.

NEW YEAR, NEW WILL?

Top of the New Year to do list for many individuals is to make or update their Will. Many think this is something to leave until later in life but it is important to get things in place once property is acquired or when children come along.

In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient and you might to want to make specific provision in your Will for your unmarried partner or for the guardianship of your children.

When considering the wording of your Will you should note that the inheritance tax (IHT) nil rate band continues to be frozen at £325,000 until 2028. There is an additional nil rate band of up to £175,000 for passing on the family home to direct descendants on death. We can work with your solicitor to make sure your Will is tax efficient.

Where the nil bands are unused on the death of the first spouse the balance is available on the death of the surviving spouse, potentially allowing a married couple (or civil partners) to pass on assets of up to £1 million without paying IHT. 

The residence nil band is even available when you downsize to a cheaper property. For example if a married couple currently live In a large house worth £500,000 and downsize to a flat worth £300,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.  They could even sell the house and move into a rental property or a care home and still benefit from this additional relief. In these circumstances, certain conditions must be met, so please speak to us if you think it may affect you.

If you haven’t yet made a Will and you would like us to put you in touch with someone who can help, then please let us know.

130% SUPER-DEDUCTION ENDS 31 MARCH 2023

The 130% super-deduction for the investment in plant and machinery was introduced in the March 2021 Budget.

The enhanced tax deduction is available to limited companies that acquire new plant and machinery between 1 April 2021 and 31 March 2023.

Companies should consider bringing forward plans to acquire new plant to benefit from this generous tax allowance. Note that the expenditure must be incurred before the 31 March 2023 deadline.

The 130% super-deduction referred to above only applies to limited companies, however the Annual Investment Allowance (AIA) is available to unincorporated businesses as well as limited companies.

EMPLOYMENT TRENDS

As we begin the new year, employers are grappling with numerous challenges such as the cost of living, staff wellbeing, hybrid working and economic headwinds.

Hybrid working has a number of benefits for staff and businesses – it can boost productivity, improve employee wellbeing, help retain staff and reduce premises costs (as not everyone needs a dedicated desk in the office). However, some team members may refuse attending the office and others could even abuse their flexible working arrangement and not perform to the expected standards.

To manage such issues, employers should have a written hybrid working policy which sets out clear expectations of staff when they are working from home. Managers should ensure that they regularly catch up with remote workers and any performance issues should be recorded on a regular basis, in a format that is set out in the hybrid working policy.

Employment contracts should also clearly state any expectations around attending the office on “in-office working days” etc. so that everyone is clear on what is required.

Cost of living and staff wellbeing are issues that are often interlinked. If your people are stressed or have worries about whether they can cover their electricity, mortgage, heating or other bills, their performance at work will likely deteriorate.

We all acknowledge that employers don’t have an endless supply of cash to increase wages in line with inflation, however, many businesses have put assistance schemes in place for their employees who may be struggling with the cost of living. 2023 looks set to be a challenging year, but it may also present employers with an opportunity to rethink their strategy and change course accordingly.

DIARY OF MAIN TAX EVENTS

DateWhat’s Due
 19/01PAYE & NIC deductions, and CIS return and tax, for month to 5/01/23 (due 22/01 if you pay electronically)
 31/01Deadline for Self-Assessment tax return for 2021/22 if filed online. Also the due date for 2021/22 balancing payment and 50% payment on account of 2022/23 tax. Note that if this liability is no more than £30,000 you can agree with HMRC to spread over 12 months
01/02Corporation tax payment for year to 30/4/22 (unless quarterly instalments apply)
19/02PAYE & NIC deductions, and CIS return and tax, for month to 5/02/23 (due 22/02 if you pay electronically)