23 Top Tax Tips for 2023

The current tax year 2022/23 will end very soon on 5 April 2023 so now’s the time to take action with tax efficient investments and planning if you haven’t done so already.

Here’s our 23 Top Tax Tips

Maybe you’ve already maximised all your tax efficient investments and set all your plans in motion for this tax year. If not, there’s still time to and there’s bound to be something on this list that will pique your interest.

The key points from a tax perspective are set out below;

Remember to top up your ISA (or LISA if you have one). ISAs and LISAs are both tax-free investments, whereby any interest, dividends or gains made therein do not give rise to tax. The maximum you can put into an ISA in any tax year is £20,000. You can also pay up to £9,000 into a Junior ISA for children.
Pay into your pension. Provided you have sufficient net relevant earnings, you can make personal pension contributions (or a salary sacrifice from your salary) of up to £40,000 depending on your level of earnings. Even if you have no relevant income, you can make a gross contribution of £3,600. Not only will the government top up 20% of your personal contributions, if you are a higher or additional rate taxpayer, you will get further tax relief of 20-25% (40% on income between £100,000 to £125,140). You can also make company contributions if you run a company.
Make any charitable donations that you are planning on making in this tax year to bring forward the tax relief, (or postpone into next tax year if earning between just over £125k to £150k as the additional rate threshold is reducing from 6 April 2023).
Maximise your dividends. The current tax-free dividend allowance is £2,000 and this is reducing to £1,000 from April 2023, and then £500 from April 2024. If you have sufficient company retained earnings and dividends are your main source of income, make sure you fully utilise the basic rate tax band.
Pay or defer any bonus income in line with the tax year that would be most efficient.
Utilise the Trivial Benefits rules for employee benefits.
If you are claiming Child Benefit, this will start to become repayable to HMRC once you/your partner earn in excess of £50,099. Consider any planning you can do to retain this where possible, such as by making pension contributions.
If you/your spouse haven’t used your full personal allowance, you can transfer 10% of what is unused to your spouse by using the Marriage Allowance if your spouse is a basic rate taxpayer.
Take steps to keep your income below £100k for the purpose of utilising the Tax-Free Childcare Scheme and the 30 hours Free Childcare.
Utilise your Capital Gains Tax annual exemption of £12,300 on the disposal of assets, whether by sale or transfer. The annual exemption is reducing to £6,000 from 6 April 2023 and then £3,000 from 6 April 2024. Also, don’t forget to claim any capital losses so these can be carried forward if there are no gains.
Make use of your Savings Allowance if you are due to be paid any interest that could be accelerated and paid before 5 April 2023, such as interest paid on loans to qualifying companies.
With the corporation tax rate rising from 19% to 25% from April 2023, consider any business decisions that could be impacted by this, whether this relates to business spending, pension contributions or changing a company year-end.
Utilise the First Year Allowance Super-Deduction before it is lost from April 2023. This applies to companies purchasing capital assets that will benefit from an enhanced capital allowance.
Utilise your available allowances by making spousal transfers of assets which are tax-free between spouses. For instance, you could transfer shares to your spouse pre-selling to utilise both your own and your spouse’s CGT free annual exemption.
Review any Buy-to-Let arrangements with your spouse/other owners - not specific to the year end but always good to plan ahead for the next tax year. Consider transferring a buy-to-let property to your lower earning spouse (be careful of the pitfalls around SDLT and mortgage lending criteria).
Make your next car an electric car and benefit from the tax relief by buying/leasing through your company or making a salary sacrifice arrangement with your employer.
In 2023/24 the new basis year reform will be introduced to make unincorporated businesses and LLPs to change their year-end in line with the tax year. If this applies, change your year-end for this year or next (depending on the tax consquences) before the full year of operation in 2024/25.
Make any tax efficient investments before the tax year ends into VCT, EIS and/or SEIS investments to bring forward the tax relief, and have the option to carry back EIS/SEIS subscriptions.
Switch to cloud accounting. Making Tax Digital is here to stay and it will be mandatory for sole traders (subject to income levels) to file quarterly returns with HMRC from April 2026 so get prepared now.
The VAT penalty regime has changed so now’s the time to make better habits and ensure you always get your VAT Returns filed on time to minimise the possibility of paying penalties.
Utilise R&D tax credits where possible. The rules are changing and could benefit you.
Consider share incentive plans to incentivise staff. Although this is not year-end specific, we’ll often find businesses using the year-end as an opportunity to plan for the future.
Utilise the £3,000 Inheritance Tax (IHT) gift allowance so gifts of capital up to this sum fall outside of your estate for IHT purposes. You can gift more if out of income without having any IHT consequences.
Bonus Tip:
Plan ahead - now’s the time to get prepared so you have everything ready for your 2023 Tax Return. Get prepared for the tax year ahead so you have your finances in order and make the most of all tax efficient planning opportunities within your grasp.