Looking ahead to 5 April 2024 – Countdown to the end of the tax year

The 2023/24 tax year draws to a close on 5 April 2024, and even though we will seamlessly flow into the 2024/25 tax year the following day, there are several allowances that reset and time limits that may expire.

Being aware of these changes and being proactive in the lead-up to the change of tax year will not only ensure that you enter 2024/25 with your tax affairs in order, but you could even save yourself some money…

Use Your Personal Allowance

For 2023/24, every UK taxpayer is entitled to a Personal Allowance of £12,570. Most UK taxpayers will utilise this allowance in full through their PAYE or self-employed income each year, meaning that when the current tax year ends and we enter 2024/25, they will receive a new Personal Allowance of £12,570 to use in the new tax year.

However, there are a significant number of UK taxpayers on low or no income who do not utilise all of their Personal Allowance and, on the basis that any unused allowance cannot be carried over to the new tax year, they will lose part of their tax-free earning entitlement. Before losing your entitlement for the current tax year, do consider whether either of the following tips apply to you, as they could save you some money:

• Personal Allowance Transfer: Spouses and Civil Partners are entitled to transfer up to 10% of their unused Personal Allowance to their partner, called a “Marriage Allowance”. This is limited to basic rate taxpayers only, but could lead to a saving of £252 in tax on your combined income. Claims can be backdated to 5 April 2019, so if you are married and have been on low or no income, you may be able to utilise the Marriage Allowance.
• Time Your Income: If you are approaching the end of the 2023/24 tax year and have not utilised all of your Personal Allowance, it would be worth considering whether any of your upcoming income from the first days/weeks of 2024/25 can be earned in 2023/24 instead. For example, if you are self-employed and are providing a service on 7 April 2024 (which falls in the 2024/25 tax year), it might be worth exploring whether you could provide the service a couple of days earlier on 5 April 2024 (which falls in the 2023/24 tax year).

The same applies to those who have already withdrawn their tax-free lump sum from their pension and are considering withdrawing a further lump sum which would be subject to Income Tax. Timing is important here as a few days can make a significant difference.

Capital Gains Exemption

As with the Personal Allowance, every UK taxpayer is entitled to an Annual Exemption to Capital Gains Tax which is reset at the end of each tax year. The Annual Exemption is reducing from £6,000 (2023/24) to £3,000 (2024/25), so it is important to consider whether you have any upcoming disposals of shares and/or assets that could be realised by 5 April 2024 to utilise the £6,000 Annual Exemption.

The sale of crypto assets falls under Capital Gains Tax and can be used to utilise the Annual Exemption. For more information on the tax treatment of crypto assets click here.

UK Bank Savings

Each year taxpayers are given an ISA allowance, which allows them to deposit up to £20,000 each tax year into an ISA on which the interest earned will be free from tax.

ISAs are an important tool in tax planning, as UK taxpayers only receive a Personal Savings Allowance of £1,000 (basic rate), £500 (higher rate) or £0 (additional rate) each tax year, meaning that many will end up paying tax on a portion of their bank interest that is earned outside of an ISA. The recent rise of interest rates only increases the chance of taxpayers exceeding their Personal Savings Allowance.

Like many other allowances, any unused ISA allowance is lost at the end of the tax year. If you have not utilised your ISA allowance, but have savings in other tax-bearing accounts, it might be worth considering moving savings into an ISA by 5 April 2024.

Claims

There are many different time limits for the various claims that can be made, but in most cases the time limits will be based on a number of years from the end of the relevant tax year. This means that the end of a tax year normally results in a past tax year ‘dropping out of time’ for making a claim. For example, the time limit for claiming a Capital Loss is 4 years from the end of the tax year in which the loss was made. So, if you made a £5,000 Capital Loss on 1 February 2020 (the 2019/20 tax year), the time limit for claiming this loss would be 5 April 2024. Failure to claim the loss within the time limit would lead to the Capital Loss being ‘lost’ and unavailable to relieve against future Capital Gains.

The same principle applies to claiming a refund or repayment for overpaid Income Tax, so it is worth reviewing your tax position before the end of a tax year to ensure that you are not time barring yourself from claiming any repayments or losses that you are entitled to.

Compliance

The end of the tax year is not only an important milestone for UK taxpayers who need to ensure that their tax affairs are correct and as efficient as possible, but it is also an important date for HMRC when it is considering the time limits that apply for taking retrospective action to correct a taxpayer’s tax position:

• Discovery Assessments for Inaccuracies in a Tax Return: If an individual has filed a self-assessment tax return containing an inaccuracy (including the omission of income), HMRC will have either 4, 6, 12 or 20 years to issue a discovery assessment. The time limits depend on the behaviour leading to the inaccuracy and whether the lost tax involves an offshore matter. As with the time limits for making Claims as advised above, tax years for discovery assessments for inaccuracies ‘drop out of time’ each time the current tax year comes to an end on 5 April.
• Regulation 80 Determinations: Where a taxpayer has been involved in an arrangement whereby they have received income from an agency in the form of loans, bypassing the application of PAYE and NIC, HMRC has either 4 or 6 years (depending on behaviour) from the end of the relevant tax year to issue a determination to recover the PAYE tax and 6 years (irrespective of behaviour) to issue a determination to recover the NICs.

Summary

The above checklist is far from exhaustive, but hopefully outlines how important it is to be proactive with your tax affairs – failing to do so may just end up costing you money!

If you are unsure about your current tax position and would like advice on past tax years, or planning for the 2024/25 tax year, please get in touch on 0203 675 8122 or email Jeremy at jeremy.johnson@intaxltd.com.