Optimising your personal tax position: It’s never too early to plan…

So, why not break old habits and think about planning earlier in the tax year. There are a few things you can consider sooner rather than later. The first important consideration is on income producing assets, and we explore this below. 

Income producing assets

The current tax year is the first one in which the highest rate of tax (47% in Scotland and 45% in the rest of the UK) is going to apply to income above £125,140. Up until April this year the highest rate of tax applied to income over £150,000 so the drop in the threshold could see quite a bit of income being exposed to those higher tax rates. That, coupled with the loss of any personal allowance where an individual’s income is over £125,140, can often produce surprising tax bills.

One way to try and take some of this income out of those higher tax brackets is to ensure that spouses or civil partners are using all of their available tax brackets. If, for example, one spouse is not using all of their basic rate tax bands, it is worth considering whether assets could be transferred to them to generate income which can then be taxed at the lower rate. 

This is particularly true given that we currently have a dividend allowance of £1,000, dropping to £500 from April 2024, so if dividends can be paid to basic rate taxpayers anything over those allowances will be taxed at 8.75% rather than the top rate of 39.35%.

There are no capital gains tax or inheritance tax implications for UK domiciled spouses and civil partners transferring assets between them.

Some of the other key considerations are covered in our full personal tax planning insight, including:

• Capital Gains Tax allowances
• Pension planning
• Inheritance Tax planning

Read the full insight