This is our 2023-24 year-end and new tax year checklist and toolkit for private clients. It can be used in conjunction with our checklists for directors, employers and self-employed individuals.
A guide for subscribers.
Note that the Chancellor, Jeremy Hunt, will present his Spring Budget on Wednesday 6 March 2024. This brief is based on announcements made before that Budget.
Tax Year 2023-24: rates & allowances
Notable changes from 6 April 2023:
- The additional rate threshold was reduced from £150,000 to £125,140.
- The dividend allowance reduced from £2,000 to £1,000.
- The individual annual investor limit for Seed Enterprise Investment Scheme (SEIS) relief of £100,000 doubled to £200,000.
- Social Investment Tax Relief (SITR) expired on 6 April 2023.
- The lifetime allowance charge is abolished.
- For those without lifetime allowance protections, the tax-free lump sum will be limited to 25% of the previous lifetime allowance limit: £268,275.
- The annual allowance increased to £60,000.
- The tapered annual allowance and money purchase annual allowance is increased to £10,000.
Capital Gains Tax (CGT)
- The annual exempt amount was reduced from £12,300 to £6,000.
- The trust annual exempt amount remains at 50%. This reduced to £3,000.
National Insurance (NI)
- From 6 January 2024, the main rate of employee Class 1 NICs is reduced by 2%, from 12% to 10%. A blended 11.5% rate applies to directors.
Welsh Income Tax
As announced at the 2022 Welsh budget, for 2023-24:
- The Welsh Rates of Income Tax rate remain at 10%.
- This retains parity between the rates of Income Tax in Wales and England/Northern Ireland for the 2023-24 tax year, with rates being 20%, 40% and 45%.
See Welsh Income Tax
Scottish Income Tax
From 6 April 2023:
- The Higher rate of Income Tax increased from 41% to 42%.
- The Top rate of Income Tax increased from 46% to 47%.
- In line with the rest of the UK, the Top rate threshold decreased to £125,140.
From 15 March 2023:
- Gift Aid donations only qualify for tax relief where they are made to UK charities and Community Amateur Sports Clubs (CASCs).
- This stops EU and EEA charities and CASCs that HMRC has not previously accepted as qualifying for charitable relief from claiming UK tax reliefs now that the UK has exited the EU.
- EU and EEA charities that HMRC has previously accepted as qualifying for relief will have a transitional period until 5 April 2024.
Capital Gains Tax (CGT): transfer of assets between spouses and civil partners in the process of separating
From 6 April 2023:
- Under Finance (No.2) Act 2023, separating spouses or civil partners are given up to three years after the tax year in which they cease to live together to make no gain/no loss transfers.
- No gain/no loss treatment will be extended further where assets are transferred between separating spouses or civil partners as part of a formal divorce agreement. In such cases, the transfer will be at no gain/no loss for CGT purposes regardless of when it occurs.
- A spouse or civil partner who moves out of the former matrimonial home, but retains an interest in it, will be given an option to claim Private Residence Relief (PRR) for the period after moving out, when it is sold to a third party.
- Individuals who have transferred their interest in the marital home to their ex-spouse or civil partner and in return are entitled to receive a proportion of the eventual sale proceeds when it is sold will be able to apply PRR to those proceeds, when received, in the same proportion that applied, or would have applied, when they transferred their original interest in the home to their ex-spouse or civil partner.
Capital Gains Tax (CGT): LLPs and Scottish partnerships disposing of joint interests in land
From 6 April 2023:
- Under Finance (No.2) Act 2023, Rollover Relief for exchanges of joint interests in land will be available for Limited Liability Partnerships and Scottish Partnerships as it would be if the land was held by the individual partners.
Inheritance Tax (IHT): bands
- The Inheritance Tax nil-rate bands are frozen until April 2028.
- The standard nil-rate band remains at £325,000.
- The residence nil-rate band remains at £175,000.
- The residence nil-rate band taper continues to start at £2 million.
Stamp Duty Land Tax (SDLT)
From 1 April 2023:
- No changes to SDLT rates & allowances.
Administration: cryptoassets reporting
Income Tax, personal allowances and basic rate bands
Review your projected tax liabilities before the end of the tax year to allow time for any appropriate planning to be undertaken.
Plan to avoid taxation at Marginal tax rates and ensure that allowances are used up.
- Personal Tax Allowances.
- Basic rate tax bands.
- Dividend allowance.
- Savings band or allowance.
- ISA allowance.
- Pensions annual allowance.
- Consider the transfer of income-producing assets between spouses and family members to use up lower rate bands.
- Consider the Transferable married couples allowance for married couples and civil partners. You can go back four years meaning claims for 2019-20 may be made up to 5 April 2024.
- Consider whether to make a Joint Property Election where spouses or civil partners wish to vary their beneficial entitlement to jointly owned assets and income, other than 50:50.
- Transfer property via a declaration of trust.
- Watch the time limits: Form 17 must be filed within 60 days in order to notify HMRC of any changes in beneficial ownership of property.
- Ensure that the Land Registry is informed if joint tenancies in land or property are severed.
- Ensure the necessary changes are made to wills. Severing a joint tenancy will make you tenants in common and property will not automatically pass on death.
- Review Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) (in Scotland) or Land Transaction Tax (LTT) (in Wales) if land and property is transferred for consideration, such as where there is a mortgage.
- Consider donations under Gift Aid and contributions to pensions: both extend the basic rate tax band and attract tax relief at higher rates.
- Gift Aid donations and pension contributions may also be used to mitigate or eliminate the effect of the tapering of the personal allowance for income exceeding £100,000.
- Child Benefit claimants and their partners need to consider their position if one earns £50,000 or more as the High-Income Child Benefit Tax Charge (HICBC) may apply. Where the HICBC cannot be avoided, consider making an election to no longer receive Child Benefit, as this may spare the need to file a tax return.
Voluntary National Insurance Contributions (NICs)
- Under an extension up to 5 April 2025, class 3 voluntary NICs can be paid for periods going back to April 2006.
- This applies to men born after 5 April 1951 and women born after 5 April 1953.
- From 6 April 2025, the normal six-year time limit is reinstated.
- Check your NI record to identify any shortfall in your NI history. You can contact HMRC here to tell them about any discrepancies in your record.
Overpayment relief claims
- The time limit for making a claim is four years following the end of the tax year.
- Claims for 2019-20 must be made by 5 April 2024.
- Claims include R43 claims for non-residents to claim their UK personal allowance, claims for errors in a return, or unclaimed reliefs.
- See Overpayment claims and relief.
- The dividend allowance reduces to £500 from April 2024.
- Consider creating new share classes and vote dividends to new family shareholders ahead of the change to the dividend allowance.
- Ensure that dividends are voted, taking into consideration the rules to prevent 'bed and breakfasting' of repayments to directors' loans (see next point).
- Ensure that dividend paperwork is up to date, see Dividends, formalities.
- Dividend waivers should be executed in advance of a new tax year or company accounting period, if different, but in the case of waivers in favour of spouses note the Settlement anti-avoidance rules.
Savings and investments
- If possible, manage income to take advantage of the £5,000 savings starting rate band, as well as the personal savings bands, see Savings income: tax on interest.
- Consider the timings of closing deposit accounts that pay interest at yearly intervals to ensure which tax year your interest falls into.
- Gift cash before interest is earned in passbooks.
- Read the small print to ensure that you will not suffer any penalty or loss of interest that could outweigh a tax saving.
- Unwanted interest received?
- You may avoid Inheritance Tax (IHT) by making cash gifts for IHT out of income or within the IHT gift limits, see Normal Expenditure out of income.
- Accounting for interest: a company may pay interest to its directors where they loan money to it. This may be advantageous given the saving tax rate and allowance, see Companies: interest paid to directors.
- Ensure that the company is deducting tax via the CT61 procedure from any annual interest paid on loan accounts in credit.
- Under the Help to Save scheme eligible persons on a low income who save £50 per month in a NS&I government-backed account, are entitled to receive two tax-free bonuses over a four-year period which could add up to £1,200. Consider gifts to allow spouses and family members to benefit from the scheme.
- Have you used up your Individual Savings Account (ISA) limits for the year? £20,000 for 2023-24.
- Have you considered funding an ISA for children or grandchildren? The limit is £9,000 for 2023-24.
- See ISA guide.
Transferable Married Couples Allowance (MCA)
- Consider the transferable married couples allowance for married couples and civil partners. The amount transferred for 2023-24 is £1,260. The election is of benefit where one spouse/partner has income below the personal allowance.
- Claims can be made for a deceased spouse and backdated up to four years.
- Non-resident spouses and civil partners entitled to the UK personal allowance can use the MCA.
- See Transferable married couples' allowance
Investments to shelter capital gains and achieve Income Tax relief
Income Tax relief
50% on up to £200,000 (£100,000 before 6 April 2023)
Can carry back one year
Gains made in the same year as the SEIS investment can be exempted up to 50% of the SEIS expenditure.
30% on up to £1m
Can carry back one year
The annual investment limit is increased to £2m provided that at least £1m is invested in 'Knowledge-Intensive' Companies (KICs)
Gains can be deferred if reinvested in an EIS from one year before to three years after they arise.
Closed to new investments from 6 April 2023.
Venture Capital Trusts (VCT)
30% on investments up to £200,000.
VCT dividends are tax-free
The investment can be cashed in tax-free after five years. Capital gains tax deferral is not available for VCT investments.
Which relief to choose?
For a comparison of the four different reliefs available to investors: Investors' Relief, Business Asset Disposal Relief, Seed EIS and EIS, see Which investment relief: IR v BADR v SEIS v EIS.
Planning for non-domiciled, non-resident, remittance basis and overseas matters
- Review residency: long-term non-domiciled individuals who are UK resident for 15 out of the last 20 years become deemed UK domiciled for Income Tax, CGT and IHT.
- Individuals who have been continuously UK resident since 2009-10 will become deemed domiciled on 6 April 2024.
- Part years and split years will count as years for the deemed domicile test.
- There is a new concept of a returning UK domiciliary to watch out for. See Non-domicile status & tax.
- Would a s.16ZA overseas capital loss election be beneficial?
- Elections must be made within four tax years of the first tax year in which the remittance basis is claimed.
- Taxpayers who first claimed the remittance basis in 2019-20 must make the election by 5 April 2024.
- Offshore trusts: UK residential property owned by an offshore structure became chargeable to UK Inheritance Tax (IHT), i.e. to ten-year anniversary and exit charges, from 6 April 2017.
- Non-domiciled and on the remittance basis: have any accidental remittances been made of income or gains to the UK within the last 45 days?
- Consider setting up a UK company and using Business Investment Relief as a means of sheltering unlimited remittances from UK taxes.
- Obtain even greater tax relief by using this in conjunction with EIS or SEIS relief.
- Not a UK resident? Don't forget the timing of capital gains. Gains accruing on the disposal of UK property are subject to CGT and a non-resident CGT return is due within 60 days see CGT and non-residents.
- Non-resident companies are subject to Corporation Tax instead of CGT on all property.
- The time limits for non-compliance for offshore matters for CGT, Income Tax and IHT are now 12 years.
- If undeclared offshore income has not already been dealt with consider making a Disclosure now.
Tax return and charges on residential property held by companies
- From April 2019 Non-Resident CGT is extended to disposals of shares in 'UK property-rich' companies i.e. companies with 75% or more of gross assets represented by UK land and property.
- The CGT rates are 10% for basic rate taxpayers and 20% for higher rate taxpayers for all assets except residential property gains, which are taxed at 18% and 28%. Trusts are taxed at 20% and 28%.
- Use up your Annual CGT exemption of £6,000 before it reduces to £3,000 from 6 April 2024: crystallise gains by disposing of assets held at a gain.
- Proceeds from assets sold may be reinvested.
- Be aware of the 30-day bed and breakfasting rules for shares (s.106A(5) TCGA 1992).
- Shares sold may be repurchased by your Pension, ISA or family members.
- If a spouse repurchases your sold shares within 30 days these may fall into the bed and breakfasting rules.
- If your spouse has an unused CGT exemption to use up and you have assets with uncrystallised gains.
- Transfer assets on a nil-gain/nil-loss basis to your spouse: the spouse may then dispose of the asset to crystallise the gain.
- Ensure that any transfer is outright to avoid the Settlement Provisions.
- Assets may be gifted rather than sold to crystallise gains.
- A gift to a charity does not attract CGT. It will be a donation that may qualify for Gift Aid.
- Shares in family companies may be gifted in tranches to use up the CGT annual exemption.
- Ensure all capital losses are claimed. Capital losses realised in 2019-20 must be claimed by 5 April 2024.
- Consider whether capital losses on shares may qualify for Income Tax relief under s.131 ITA 2007.
- Gains on the sale of all residential property must be declared and the tax paid within 60 days of completion.
- Gifts of trading company shares in excess of the CGT allowance will be taxed at 10% or 20%. Alternatively, a s.165 holdover claim may be made.
- Gifts of shares in Family investment companies will be taxed at 10%/20%. They will not qualify for s.165 holdover unless the company is trading.
- Review share and loan investments in unquoted trading companies and consider making negligible value claims to crystallise Income Tax losses. See Loss relief: loans and shares.
- Negligible value claims can effectively be carried back up to two years, see Negligible value claims.
- If there is any possibility of selling assets or a business, plan ahead: check the qualifying conditions, which must apply for two years before the sale for Business Asset Disposal Relief.
- Business Asset Disposal Relief (BADR) and the Associated disposals rules. Don't forget ‘just and reasonable’ restrictions will apply where there has been mixed use of an asset.
- Note that individuals must have 5% of rights to assets on a winding-up and rights to dividends or entitlement to 5% of the proceeds on a sale of the ordinary share capital, as well as 5% of voting rights.
- From 11 March 2020, the lifetime limit for BADR is reduced to £1 million.
- Distributions made on the liquidation of unwanted trading companies during 2023-24: anti-phoenixing counteraction measures under the Targeted Anti-Avoidance (TAAR) rules block CGT treatment on liquidation if a new business commences within two years of the old one. Check the taxpayer's business activities in the two years following liquidation. Use our TAAR tool to see if this affects you.
CGT Private Residence Relief (PRR)
- The final period exemption was reduced from 18 months to nine months from 6 April 2020.
- Lettings relief was removed from 6 April 2020 unless the property owner remains in occupation of the property alongside the tenant.
- Review any Main Residence Elections before the end of the tax year.
- See PRR: Private Residence Relief.
PRR spouse transfers
- From April 2020, when a property is transferred between spouses the transferee spouse takes over the transferor spouse's ownership period and use of the property.
- This can allow for the use of the spouse’s CGT annual exemption and available basic rate band where full relief is not available.
Inheritance Tax (IHT) planning
- Review current Rates and allowances and see also the Estate planning checklist.
- Use up your £3,000 annual gift allowance; remember it can be carried forward one year.
- Use up the £250 small gifts to individuals allowance.
- IHT-free gifts may be on the occasion of a wedding. Limits are: up to £1,000 for any person, £2,500 for grandparents and £5,000 for parents.
- Make a gift now and in seven years it falls out of IHT charge.
- Regular gifts out of income are exempt from IHT. If you can start making Regular gifts out of income for IHT purposes, document your gifts in writing to the donee.
- Review assets that potentially qualify for Business Property Relief (BPR) or Agricultural Property Relief (APR) to ensure that the qualifying conditions remain. Exercise caution over Furnished Holiday Lettings and farmhouses.
- Note that from 6 April 2024 the geographical scope of APR and Woodlands Relief, for IHT purposes, will be restricted to property in the UK.
- Property located in the European Economic Area (EEA), the Channel Islands, and the Isle of Man will be excluded from relief.
- This may mean estates face additional IHT exposure from 6 April 2024 which may need to be planned for.
- IHT discount on charitable donations: if you leave 10% of your estate to charity your IHT rate falls to 36%. This also interacts with Gift Aid by using a combination of lifetime and death giving may maximise bequests in the charity’s hands.
- There is a restriction on Liabilities against the estate: relief for loans which can be set against the asset which secures a loan.
- The full £175,000 Residence Nil Rate Band (RNRB) is available for 2023-24 and future tax years, but review estate values to determine whether tapering will apply (estates >£2m).
- Ensure contributions are paid (that is that they leave the bank account) within the tax year in order to claim relief.
- The maximum pension contribution for non-earners is £2,880 net (grossed up to £3,600).
- Contributions can be made in respect of children and other family members.
- If you are considering making 2023-24 pensions savings in excess of £60,000 you will need to work out your brought forward Annual Allowances for the last three years to work out the maximum relief available to you.
- Unused allowances can be carried forward providing the individual was a member of a pension scheme in the earlier tax years. To 5 April 2024, the maximum contributions if none have been made since 2019-20 are £180,000 (£60k + £40k + £40K + £40K).
- For 2023-24, the annual allowance is tapered by £1 for every £2 that an individual's income exceeds £260,000, reducing to a minimum allowance of £10,000.
- The lifetime allowance charge was abolished from April 2023.
- The pensions cap may adversely affect those in well-funded schemes (such as NHS employees) and individuals should monitor contributions accordingly.
- A personal company may make contributions to a director's or an employee's registered pension scheme, but ensure that funds clear bank accounts within the tax year.
- Pensions drawdown: review small schemes and consider drawing down pensions tax-free. Note that this may trigger the money purchase annual allowance.
- Company owners/partners: are you Charging your business rent? Review rent and licence agreements with family businesses before the year-end and adjust service charges where there are major changes in utility costs. Make new agreements for the new tax year.
- Do not overlook the fact that rent paid may preclude Business Asset Disposal Relief on the disposal of business land and property held personally.
- The Off-Payroll Working rules have applied to those working in the private sector from 6 April 2021 where the end client is large or medium. Personal Service Companies (PSC) owners should continue to consider whether the new rules apply to them and if they will still need their PSC. See Off-Payroll Working: PSC & Private Sector Engagers.
- If you plan to sell your business, will the £1 million lifetime limit for Business Asset Disposal Relief be sufficient or do you need to consider bringing spouses or family members into the business in advance of any sale to ensure they can meet the qualifying conditions for relief? Remember that they will need to meet the qualifying conditions for two years.
- Incorporation of a property rental business or even a single buy-to-let can be attractive for higher-rate taxpayers who are property business owners. This has especially been so given relatively low Corporation Tax rates and the introduction of the restriction in tax relief on financing costs for higher rate taxpayers which took full effect from 6 April 2020.
- However, Corporation Tax rates increased to 25% for companies with profits over £250,000 from April 2023 with marginal rates applying between £50,000 and £250,000 and reduced limits for companies with associated companies such as group companies.
- If you sell your buy-to-let you will have to declare and pay the Capital Gains Tax within 60 days.
- Relief for individual landlords' business finance costs has been restricted since April 2017:
- Relief is to be restricted to the basic rate and given as a tax reduction, not an allowable expense.
- This measure is fully in place for 2023-24 meaning relief will only be available at the basic rate of tax.
- Any excess finance costs may be carried forward to the following years.
- HMRC considers that this measure will apply to directors who charge their company rent, on certain property loans taken out from April 2017. See Charging your company rent will the new interest restrictions apply?
- Tax savings: see case study in Buy-to-let ownership: personal v company
- See Restricting mortgage interest relief (subscriber guide)
- From 1 April 2021, SDLT rates are 2% higher for non-residents purchasing UK residential property than those that apply to residential purchases made by UK residents.
- The charge will apply to purchases of both freehold and leasehold residential property as well as increasing SDLT payable on rents on the grant of a new lease. See SDLT: Non-residents' surcharge
Planned incorporation of a property business: Stamp Duty Land Tax (SDLT)
- No SDLT is payable by the new company following incorporation of a partnership in respect of partnership land and property, provided that the partners are also the new company shareholders.
- If property is held in a sole name, it can be transferred into joint names and then into a partnership before the incorporation of the partnership. This saves SDLT, however, you have the compliance costs of trading as a partnership. It may not be practical, or a cost-efficient suggestion see Buy-to-let: incorporation for further discussion.
- Don't overlook SDLT, Land Transaction Tax (LTT) (Wales) or Land and Buildings Transaction Tax (LBTT) (Scotland) returns where there is chargeable consideration.
- There are pros and cons with both planning points above, so work through the different consequences to maximise tax relief.