It’s the start of a new 2023/24 tax year and here’s our quick guide to the new allowances.
Your annual ISA allowance remains at £20,000 per year
Once your money is invested in an ISA, any interest or investment growth is tax-free, meaning you won’t need to pay tax on savings interest, capital gains or dividends that can be charged on other savings and investments.
The junior ISA allowance also remains at £9,000 per year.
Up to £40,000 or an amount that is equal to your annual salary (whichever figure is lower) can be paid into your pension this tax year and still receive tax relief. This is known as the pension annual allowance
For higher earners, this could taper down to £4,000. The tapered annual allowance is lower than the standard annual allowance and is based on your level of taxable income within the tax year.
If you haven’t used your full pension annual allowances in the last three tax years, you could carry these over, using pension carry forward.
3. Dividends and gains
The tax-free allowance for dividend income (the ‘Dividend Allowance’) is £1,000 from 6 April 2023 and will reduce to £500 from 6 April 2024 for individuals who receive dividend income
Dividend income is added to the total of all your other income and the tax rate payable will depend on what income tax bracket the dividends fall into.
There are a number of things you can do to mitigate your dividend tax liability.
Capital Gains Tax (CGT) is a tax on the profit when you sell an asset that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.
Some assets are tax-free. You also do not have to pay CGT if all your gains in a year are under your tax-free allowance. £6,000 for the 2023-24 tax year, reducing down to £3,000 for the 2024-25 tax year.
Each tax year, you’re given a range of exemptions when making financial gifts, which could help reduce your inheritance tax bill.
Get in touch
If you’d like to find out more about how you can make the most of your allowances this tax year, get in touch. It all starts with a conversation.
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The value of an investment may fall as well as rise. You may get back less than the original amount invested.
This article should be used for information purposes only and is subject to change without notice. None of the information contained in this article constitutes financial or other professional advice in any way. If you require additional information, you should contact Magus directly.
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Tax legislation is that prevailing at the time, is subject to change without notice and dependent on individual circumstances. You should always seek appropriate tax advice before making decisions.