Don’t Miss Out: How to Make the Most of Your Tax Allowances

How to Make the Most of Your Tax Allowances

As the new tax year approaches, it’s important to understand the various tax allowances available. With the right planning, you can make the most of these allowances and potentially reduce your tax bill. In this article, we’ll take a look at some of the tax allowances that BlueSphere clients should be aware of for the upcoming tax year.

  1. Personal Allowance: The personal allowance is the amount of income that you can earn before you start paying income tax. For the tax year 2022/23, the personal allowance is £12,570. This means that if you earn less than this amount, you won’t have to pay any income tax.
  2. Marriage Allowance: If you are married or in a civil partnership, you may be eligible for the Marriage Allowance. This allows one partner to transfer up to 10% of their personal allowance to the other partner. This can be useful if one partner earns less than the other, as it can help to reduce their tax bill.
  3. Capital Gains Tax Allowance: If you sell an asset such as a property or shares and make a profit, you may be liable to pay Capital Gains Tax (CGT). However, you can make use of the CGT allowance to reduce the amount of tax you pay. For the tax year 2022/23, the CGT allowance is £12,300.
  4. ISA Allowance: If you’re looking to save or invest money, it’s worth considering an Individual Savings Account (ISA). The ISA allowance for the tax year 2022/23 is £20,000, which means you can save up to this amount tax-free. You can choose between a Cash ISA or a Stocks and Shares ISA, depending on your investment goals.
  5. Pension Allowance: If you have a pension, you can contribute up to a certain amount each year without incurring a tax charge. This is known as the pension allowance, and for the tax year 2022/23, it is £40,000. (£60,000 from April 23) It’s worth noting that if you earn over £240,000, your pension allowance may be reduced.
  6. Inheritance Tax Allowance: If you’re concerned about the amount of Inheritance Tax (IHT) your beneficiaries may have to pay, it’s worth taking advantage of the IHT allowance. This allows you to pass on a certain amount of assets tax-free when you die. For the tax year 2022/23, the IHT allowance is £325,000.

By making use of these tax allowances, you can potentially reduce your tax bill and save money. However, it’s important to seek professional advice to ensure that you’re making the most of your allowances and complying with HMRC regulations.

Each month we’ll aim to bring a bit of humanity and common sense back into the world of finance.


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