Are tax cuts on the horizon?

Calls are growing for the Government to cut taxes for the British public.

It comes as the Adam Smith Institute has released new figures to mark their Tax Freedom Day, which showed the UK taxpayer will work an average of 159 days this year to pay their taxes.

The day marks the point that the average taxpayer would start pocketing their earnings if they had to pay all their taxes first.

They have calculated this day to fall on 7 June, with their figures stating UK taxpayers will pay £869.4 billion in taxes this year, the equivalent to 43.29 per cent of the UK’s net national income.

So with tax cuts hitting the headlines, in what other ways can tax savings be made?

Consider these tax planning tips.

Dividend Tax and Remuneration

Dividend taxation – Have you utilised the zero per cent Dividend Tax Band of £2,000?

Capital Gains Tax – Have you used your annual exemption for 2022-23 of £12,300?

Salaries – Consider payment of salaries to owner-managers at tax-efficient levels

Personal Tax Planning

Exchange your salary for benefits – Consider exchanging part of your salary for payments into an approved share scheme or additional pension contributions, to take you below the £100,000 threshold.

Dividends and bonuses – Pay these early, so that they fall into the current tax year.

Directors’ Loans – Have you used the tax-free interest amount on any loans to your business? Depending on your income level, you could save up to £1,000.

Pensions and Tax

Protecting your pension – The Lifetime Allowance (LTA) has changed considerably in recent years and currently stands at £1,073,100 for 2022/23. It has been frozen at this level until the 2025/26 tax year.

Annual pension allowance –You can invest up to £40,000 a year into a pension tax-free. This amount can be carried over three years, allowing you to use unused allowance to top up your pension.

Stakeholder pension – All UK residents including children can make annual net contributions of £2,880 per year (£3,600 gross) regardless of whether they have any earnings.

Pension drawdown – If you are 55 or over, you may be able to start drawing down pension benefits now from a personal pension such as a SIPP, even if you are still working.

Do you need advice with tax planning? Contact our team today for expert support.

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