The VAT registration threshold rose from £85,000 to £90,000 from 1 April 2024. The deregistration threshold increased from £83,000 to £88,000 from the same date. The changes in the thresholds change the trigger points for compulsory registration and optional deregistration.

When must you register?

You must register for VAT if your taxable turnover in the last 12 months was more than the VAT registration threshold of £90,000 or if you expect your turnover to go over £90,000 in the next 30 days.

You must also register if you and your business are based outside the UK and you supply goods and / or services to the UK, or expect to do so in the next 30 days.

Taxable turnover

The key metric here is ‘taxable turnover’ which may be different to your actual turnover. Taxable turnover includes only those supplies that are within the scope of VAT, i.e. supplies that would be liable to VAT at the standard, reduced or zero rate if the business were registered for VAT. There is no need to take account of exempt supplies in determining whether the VAT registration trigger has been reached.

Registration deadline

If your turnover exceeded £90,000 in the last 12 months, you must register within 30 days of the end of the month in which your turnover for the preceding 12 months reached £90,000. Your effective date of registration is the first day of the second month in which your turnover for the previous 12 months exceeded the VAT registration threshold.

Example

In the 12 months to 18 May 2024 your turnover was £92,430. This is the first time in a 12-month period that your turnover has exceeded the VAT registration threshold. You must register for VAT by 30 June 2024. Your effective date of registration will be 1 July 2024.

Where you expect your turnover in the next 30 days to exceed the VAT registration threshold of £90,000, you must register by the end of that 30-day period. Your registration takes effect from the date that you realised that the threshold would be exceeded.

Example

On 2 July 2024 you sign a contract to deliver standard rated goods with a value of £120,000 by 15 July 2024. You will be paid on delivery. You must register by 31 July 2024. Your effective date of registration is 2 July 2024.

Voluntary registration

If your taxable turnover is below the VAT registration threshold, you can opt to register voluntarily. This can be beneficial if you make mostly zero-rated supplies but incur VAT on goods and services that you buy as it will enable you to recover the VAT that you incur.

If you register for VAT and you supply goods and services that are liable to VAT at the standard or reduced rate, you will need to charge VAT to your customers. If your customers are not VAT-registered, they will not be able to recover the associated VAT, and this may make you less competitive than other suppliers who are not VAT-registered. Registering for VAT will also mean that you will need to comply with MTD for VAT, and this will add additional costs.

It is important to assess the pros and cons before opting to register voluntarily.

Deregistration

At £88,000, the deregistration threshold is now more than the VAT registration prior to 1 April 2024. Businesses whose turnover was just over the old £85,000 registration limit but below £88,000 now have the option to deregister. This may be beneficial to make them more competitive against businesses who are not VAT-registered. It will also relieve them of the need to file VAT returns and comply with MTD for VAT. However, if you deregister, you will no longer be able to recover any input VAT suffered.

If your turnover is likely to increase beyond the new VAT registration threshold of £90,000 in the near future, arguably, it is not worth deregistering as you will need to re-register once the registration threshold is reached.

If you run your business as a personal or family company, you will need to extract your profits in order to use them personally outside your company, for example, to meet your living expenses. There are various ways of doing this, some more tax efficient than others. Although there is no ‘one size fits all’ and your optimal profit extraction strategy will depend on your personal circumstances, a popular approach is to pay a small salary and to extract further profits as dividends.

Salary

There are benefits in paying yourself a salary. Your company will be able to deduct the salary plus any associated employer’s National Insurance in calculating its taxable profits. If the salary does not exceed your personal allowance, you will not have to pay any tax on it. Likewise, as long as it is not more than the Class 1 primary threshold, there is no employee’s National Insurance to pay either.

It is also beneficial to pay a small salary to secure a qualifying year for state pension and benefit purposes. This is advantageous if you do not already have the 35 qualifying years needed for the full state pension. For 2024/25, you need to pay a salary of at least £6,396 (equal to the lower earnings limit for the year). If you pay a salary of between £6,396 and the primary threshold of £12,570, you are deemed to have paid National Insurance contributions at a notional zero rate, which means you get a qualifying year for free.

For 2024/25, assuming that your personal allowance is £12,570 and it is not used elsewhere, the optimal salary is £12,570. This can be paid free of both tax and employee’s National Insurance. However, there will be some employer’s National Insurance to pay if you are not eligible for the Employment Allowance, which will be the case if you operate your business through a personal company and you are the sole employee and a director. For 2024/25, employer’s National Insurance is payable at 13.8% to the extent earnings exceed £9,100 (unless a higher secondary threshold applies, for example, because you are under 21 or an armed forces veteran in the first year of your first civilian employment since leaving the armed forces). On a salary of £12,570, the employer’s National Insurance hit is £478.86. However, like the salary, it is deductible in computing your company’s taxable profits.

If the Employment Allowance is available, as may be the case if you operate a family company or have other employees, there will be no employer National Insurance to pay on a salary of £12,570.

Once a salary of £12,570 has been paid, it is not tax efficient to pay a higher salary or a bonus as the combined tax and National Insurance hit will outweigh the corporation tax savings.

Dividends

Dividends are taxed at a lower rate than salary and bonus payments and also benefit from their own tax-free allowance. Once a salary of £12,570 has been paid, it is more tax efficient to extract further profits as dividends if you have sufficient retained profits to be able to do so. There are some watch points here. Dividends are paid from retained profits and can only be paid if your retained profits are at least equal to the proposed dividend. Further, if there is more than one shareholder for a class of shares, dividends must be paid in proportion to shareholdings. However, this can be overcome by using an alphabet share structure whereby each shareholder has their own class of share, allowing the flexibility to tailor dividends to the shareholder’s personal circumstances.

As dividends are paid from post-tax profits, corporation tax has already been paid at between 19% and 25% depending on the level of the company’s profits. If the dividend allowance is still available, dividends up to the allowance (set at £500 for 2024/25) can be enjoyed tax-free. Once the dividend allowance (and any remaining personal allowance) has been used up, dividends are treated as the top slice of income and taxed at the dividend tax rates, set for 2024/25 at 8.75% where dividends fall in the basic rate band, at 33.75% where they fall in the higher rate band and at 39.35% where they fall in the additional rate band.

Other options

Profits can also be extracted in the form of benefits in kind, or rent if the company is run from a home office. It can also be tax efficient for the company to make pension contributions on your behalf.

Rising interest rates mean that individuals may now be paying tax on their savings income which previously they received it tax free. Where this is the case, it is prudent to consider the options available to earn savings income tax free. ISAs feature on this list.

Savings allowance for basic and higher rate taxpayers

Individuals who pay tax at the basic or higher rate are entitled to a savings allowance. For 2024/25, the savings allowance is set at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers.

When interest rates were low, many taxpayers did not need to think about tax-free savings accounts as the savings allowance was sufficient to cover any interest that they earned. With higher interest rates, this may no longer be the case. For example, a higher rate taxpayer with savings of £20,000 would only receive interest of £400 a year at an interest rate of 2% which would be covered by their savings allowance of £500. However, if the taxpayer was now receiving interest of 5% on their savings of £20,000, the interest would be £1,000 a year of which only £500 would be covered by the allowance, leaving the remaining £500 taxable.

Additional rate taxpayers do not receive a savings allowance.

ISAs

Individual Savings Accounts (ISAs) are tax-free savings accounts. There are four different types of ISAs:

1. cash ISA;
2. stocks and shares ISA;
3. innovative finance ISA; and
4. lifetime ISA.

Individuals have an annual ISA allowance which they can invest in one or more of the different ISAs.

The limit applies to the amount invested across all four ISAs in the tax year. For 2024/25, the limit is £20,000. The individual can choose how to allocate this. For example, an individual could invest £10,000 in a cash ISA and £10,000 in a stocks and shares ISA in 2024/25. However, investments in a lifetime ISA are capped at £4,000 a year but this counts towards the annual £20,000 ISA allowance.

There is no tax to pay on interest on cash in an ISA or income (such as a dividends) or capital gains on investments held within an ISA.

Cash ISA

Banks and building societies offer cash ISAs which, as the name suggests, are accounts that hold cash only. National Savings and Investments also offer cash ISA products. Interest on cash in an ISA is tax-free.

Where interest from savings accounts exceeds the personal savings allowance, consideration could be given to moving some of the cash to an ISA to allow the interest to remain tax-free.

Stocks and shares ISA

Investments in a stocks and shares ISA can include shares in companies, unit trusts and investment funds, corporate bonds and government bonds. However, it is not possible to transfer stocks and shares already owned outside an ISA into a stocks and shares ISA with the exception of those awarded under an employee share plan.

Innovative finance ISA

An innovative finance ISA is one that contains peer-to-peer loans rather than cash or stocks and shares.

Lifetime ISA

A Lifetime ISA can only be opened by someone aged 18 and over but under 40. A person can invest up to £4,000 a year in a Lifetime ISA until they reach the age of 50. The first payment must be made before they reach the age of 40. The Government add a bonus of 25% (capped at £1,000 a year).

Money can only be withdrawn to buy a first home or on reaching age 60, or if the saver is terminally ill with less than 12 months to live. If withdrawals are made in other circumstances, a withdrawal charge of 25% applies, clawing back the Government bonus.

New UK ISA

At the Spring Budget, the Chancellor announced that the Government would be launching a new UK ISA which would provide savers with the opportunity to earn tax-free savings income while investing in UK companies. The UK ISA will have its own £5,000 allowance which would be available in addition to the existing £20,000 ISA allowance.

The Government are consulting on what this may look like.

Financial advice

It is important to take financial advice from a qualified professional before making investments.

As widely predicted, in his 2024 Spring Budget, the Chancellor announced a 2% cut in the main rates of Class 1 and Class 4 National Insurance contributions. We explain what employees and the self-employed will now pay in 2024/25.

Employees

The main rate of primary Class 1 National Insurance contributions, which are payable by employed earners on earnings between the primary threshold and the upper earnings limit, fell from 12% to 10% with effect from 6 January 2024. The rate was due to remain at 10% for 2024/25 but has now been reduced by a further 2% to 8%. This latest cut will save employees up to £754 in Class 1 National Insurance contributions in 2024/25

As a result of the latest cut, employees will now pay primary Class 1 contributions at a rate of 8% on earnings between the primary threshold, set at £242 per week (£1,048 per month; £12,570 per year), and the upper earnings limit, set at £967 per week (£4,189 per month; £50,270 per year) and at a rate of 2% on earnings in excess of the upper earnings limit.

Employed earners whose earnings are between the lower earnings limit of £123 per week (£533 per month; £6,396 per year) and the primary threshold are treated as paying notional contributions at a zero rate which gives them a qualifying year for state pension purposes.

Employers

Employers did not benefit from a rate cut and the secondary rate remains at 13.8% for 2024/25.

Self-employed

At the time of the 2023 Autumn Statement, the Chancellor announced that the main rate of Class 4 National Insurance contributions would fall by 1%, from 9% to 8%, with effect from 6 April 2024. A further 2% cut was announced in the Spring Budget, reducing the main rate to 6%.

As a result, for 2024/25, self-employed earners will pay Class 4 National Insurance contributions at 6% on profits between £12,570 and £50,270 and at 2% on profits in excess of £50,270. Self-employed earners with profits between the small profits threshold, set at £6,725, and the lower profits limit of £12,570 are awarded a National Insurance credit to provide them with a qualifying year for state pension purposes.

Class 2 contributions have been abolished for 2024/25 onwards. However, self-employed earners with earnings below £6,725 can make voluntary contributions at the 2023/24 rate of £3.45 per week to preserve their state pension entitlement.

The 2024/25 tax year starts on 6 April 2024. Although many of the rates and thresholds are the same as for 2023/24, there are some changes.

Income tax

The income tax rates for 2024/25 for England, Northern Ireland and Wales are set out in the table below.

	Rate	Band of taxable income
Basic rate	20%	£1 to £37,700
Higher rate	40%	£37,701 to £125,140
Additional rate	45%	Over £125,140

The income tax rates applying to the non-savings non-dividend income of Scottish taxpayers are set by the Scottish Government.

Personal allowances

The personal allowance for 2024/25 remains at £12,570. Once adjusted net income reaches £100,000, it is reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that individuals with adjusted net income of £125,140 and above do not receive a personal allowance.

The marriage allowance, which allows an individual to transfer 10% of their personal allowance (as rounded up to the nearest £10) to their spouse or civil partner as long as neither pays tax at a rate in excess of the basic rate, remains at £1,260 for 2024/25.

The married couple’s  allowance, available where at least one spouse or civil partner was born before 6 April 1935, is set at £11,080 for 2024/25. The allowance is reduced where income exceeds £37,000 by £1 for every £2 by which adjusted net income exceeds £37,000 until the minimum amount of the allowance is reached. This is set at £4,280 for 2024/25. Effect is given to the married couple’s allowance in the form of a 10% tax reduction.

Dividends

All individuals, regardless of the rate at which they pay tax, are entitled to a dividend allowance. This is set at £500 for 2024/25.

Dividends not sheltered by the dividend allowance or any unused personal allowances are treated as the top slice of income and taxed at the appropriate dividend tax rate. This is the ordinary dividend rate of 8.75% where the dividend falls in the basic rate band, the dividend upper rate of 33.75% where the dividend falls in the higher rate band and at 39.35% where the dividend falls in the additional rate band.

Savings

Basic and higher rate taxpayers are entitled to a savings allowance. For 2024/25, this is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers do not receive a savings allowance.

Savings income falling within the savings starting rate band of £5,000 is taxed at 0%. The starting rate band is reduced by every £1 of taxable income.

Capital gains tax

For 2024/25, the capital gains tax annual exempt amount is £3,000.

Capital gains are taxed at 10% where income and gains do not exceed the basic rate band of £37,700. Where income and gains exceed the basic rate band, capital gains are taxed at 20%. Higher rates apply to gains on residential property. For 2024/25, these are, respectively, 18% and 24%.

The High-Income Child Benefit Charge (HICBC) is a tax charge that operates to claw back child benefit where the claimant and/or their partner have adjusted net income in excess of the clawback threshold. For 2023/24 and previous years, this was set at £50,000. The HICBC was equal to 1% of the child benefit paid for every £100 of adjusted net income in excess of £50,000. Once income reached £60,000 the HICBC is equal to the child benefit paid for the year.

Where both the claimant and their partner have income in excess of £50,000, the HICBC is levied on the partner with the higher income.

Higher thresholds from 6 April 2024

The threshold triggering the HICBC is increased to £60,000 from 6 April 2024. From that date, the clawback rate is reduced to 1% of child benefit for every £200 by which adjusted net income exceeds £60,000. This means that the charge is equal to the child benefit for the year once adjusted net income reaches £80,000.

The increased threshold and reduced clawback rate mean that, for 2024/25, child benefit for the year is not lost unless the higher earning partner has income of £60,000; and as long as their income does not exceed £80,000, some child benefit will be retained.

Example

Gemma and George have two children. Gemma looks after the children and does not have an income in either 2023/24 or 2024/25. George has adjusted net income of £70,000 in each year.

In 2023/24, George is liable to the HICBC equal to the child benefit received in the tax year.

However, for 2024/25, George’s HICBC charge is only equal to 50% of their child benefit. His income exceeds the £60,000 threshold by £10,000. At a rate of 1% for every £200 of income above £60,000, this equates to a charge of 50%.

Move to household income

At present, the trigger for the HICBC is individual income not household income. This creates some anomalies. For example, for 2023/24 and earlier years, a couple where each partner had adjusted net income of £49,999 (combined income of £99,998) retain their child benefit in full, whereas a couple where one partner has no income and the other has income of £60,000 lose all their child benefit in the form of the HICBC. For 2024/25, a couple each with adjusted net income of £59,999 (combined income of £119,998) retain their full child benefit, whereas a couple where one partner has no income and the other has income of £80,000 lose all their child benefit in the form of the HICBC.

To address this unfairness, the government announced a move to a system based on household income from April 2026.

Important to claim

Where the HICBC applies, the claimant can elect not to receive child benefit. However, to preserve the associated National Insurance credit, it is important that child benefit is still claimed. This will provide qualifying years for state pension purposes, something that is particularly important if the claimant does not have sufficient income from employment or self-employment to secure a qualifying year.

Tax codes are fundamental to the operation of PAYE. If your tax code is correct, you should pay the right amount of tax on your PAYE income. However, if your tax code is not correct, PAYE will not work as intended and you may find that you have paid too much or too little tax. It is important, therefore, that you understand your tax code and also that you check that it is correct.

Your tax code will normally comprise letters and numbers; however, there are special codes which may not follow this format.

The number

If you have a suffix code, the number in the tax code will indicate the amount of tax-free income you can receive in the tax year. This will reflect both your allowances and any deductions from your allowances. The number is the net amount of allowances less deductions without the last digit.

For example, if you are entitled to the standard personal allowance of £12,570 and there are no deductions from your allowances, the number element will be 1257. Likewise, if you have received the marriage allowance from your spouse or civil partner so that your personal allowance has been increased to £13,830, the number element will be 1383.

Deductions

Amounts may be deducted from your personal allowance to allow tax on non-payrolled benefits in kind or untaxed interest or dividends to be collected through PAYE. Deductions may also be made from your tax code to collect underpayments of tax which may be the case if you have tax to pay under Self Assessment and you opted for this to be collected through PAYE via an adjustment to your tax code.

For example, if you are entitled to the standard personal allowance of £12,570 and have a company car with a cash equivalent value of £5,000, your net allowances are £7,570 (£12,570 – £5,000) and the number element of your tax code is 757.

Where you have a tax underpayment, the amount of the deduction is found by grossing up the tax that you owe at your marginal rate of tax (for example, if you owe £1,000 and pay tax at the higher rate, the deduction in your code would be £2,500 as 40% of £2,500 is £1,000).

The letters

The letters indicate your personal situation and how tax is to be deducted.

The following letters may be used on the tax codes of English and Northern Irish taxpayers.

Letter (s)	Meaning
L	You are entitled to the standard personal allowance
M	You received the marriage allowance from your spouse or civil partner
N	You have transferred the marriage allowance to your spouse or civil partner
T	You tax code includes other calculations
0T	Your personal allowance has been used up or you have started a new job and your new employer does not have the information they need to give you a tax code
BR	All income from this job or pension is taxed at the basic rate, usually where you have more than one job
D0	All income from this job or pension is taxed at the higher rate, usually where you have more than one job
D1	All income from this job or pension is taxed at the additional rate, usually where you have more than one job

Scottish and Welsh taxpayers

Scottish taxpayers have an ‘S’ in their code, for example, ‘SBR’, whereas Welsh taxpayers have a ‘C’, for example, CD0.

K codes

A K code is used where deductions exceed allowances. This may be the case if you do not receive a personal allowance because your income is more than £125,140 a year and you have deductions, for example, to tax benefits in kind.

For a K code, the number element represents ‘additional pay’ which is added to your actual pay to collect the correct amount of tax. Deductions are subject to an overriding limit of 50% of pay.

Emergency codes

PAYE is normally operated on a cumulative basis. However, there are certain situations where you may be given an emergency code which indicates that your tax is calculated non-cumulatively by reference only to your pay for that week or month. An emergency code will end in ‘W1’, ‘M1’ or ‘X’, for example, 1257L M1.

Check your code

To avoid nasty surprises at the end of the tax year it is important to check that your tax code looks correct, and that you tell HMRC if it is not. You can do this via the HMRC app.

It is often said that inheritance tax (IHT) is a voluntary tax, and one that can be avoided if you give away sufficient assets at least seven years before you die so the value of your estate is sheltered by your available nil rate bands. This is not always practical – people do not generally know when they are going to die and they need somewhere to live and the ability to fund their life in the meantime. However, there are various IHT allowances and exemptions that allow lifetime gifts to be made free of inheritance tax, even if you die within seven years of making the gift.

Regular payments from income

Gifts that you make from your income do not count as part of your estate for IHT purposes as long as you can afford to make the payments after meeting your living costs and the payments are made out of your regular income. For example, if you have surplus income each month, you could help a child with their rent, pay school fees for a grandchild or provide financial assistance for a relative.

You can give away as much of your surplus regular income as you like, and also take advantage of various allowances and exemptions to make gifts from your capital free of IHT.

IHT annual exemption

The annual exemption allows you to make gifts of up to £3,000 a year without them being included in your estate for IHT purposes. Unlike many other annual exemptions and allowances, if the IHT annual exemption is not used in full for one tax year, the unused amount can be carried forward to the next tax year. However, the exemption for the current year must be used before any unused amount from the previous year.

If you did not use your 2022/23 annual exempt amount, you can make gifts of up to £6,000 before the end of the 2023/24 tax year without them being added to the value of your estate.

Small gift allowance

The small gift allowance means that you can make gifts of £250 a year to as many people as you like without the gifts counting as part of your estate. However, there is a catch – gifts to the same person cannot benefit from both the small gift allowance and another allowance or exemption.

Wedding and civil partnership gifts

The value of this exemption depends on the relationship between you and the recipient of the gift. For wedding and civil partnership gifts to a child, the exemption is £5,000, for a grandchild, it is £2,500 and for a wedding or civil partnership gift to any other person, the exemption is £1,000.

The same person can benefit from a wedding/civil partnership gift and other exemptions and allowances with the exception of the small gift allowance. For example, if you have not used your 2023/24 or 2022/23 annual exemption and your child marries before 6 April 2024, you could make a wedding gift of £11,000 free of IHT.

Gifts to spouses and civil partners

Gifts to spouses and civil partners can be made free of IHT without limit.

Other gifts

Exemptions also apply for certain gifts to charities or registered clubs, political parties, housing associations and to gifts for national purposes or public benefit.

Paying National Insurance contributions allows individuals to earn qualifying years, which in turn provides them with entitlement to the state pension and certain contributory benefits. Entitlement may also be provided by the award of National Insurance credits.

State pension entitlement

A person reaching state pension age on or after 6 April 2016 needs 35 qualifying years to benefit from the full state pension. A person who has less than 35 qualifying years but at least ten on reaching state pension age will receive a reduced state pension.

It is important to check your National Insurance record to see if you will qualify for the full state pension. This can be done online by visiting www.gov.uk/check-state-pension. Gaps can be filled in by paying voluntary contributions.

Class 3 voluntary contributions

Class 3 National Insurance contributions are voluntary contributions which can be paid to buy additional qualifying years to boost your state pension. Each additional qualifying year increases the state pension by 1/35^th. At 2023/24 rates, each additional qualifying year up to the 35 qualifying year maximum increases the state pension by £5.82 a week (£302.86 a year).

For 2023/24, Class 3 contributions are payable at a rate of £17.45 a week. The rate is to remain at this level for 2024/25.

Class 3 voluntary contributions must be paid within six years of the end of the tax year to which they relate, so by 5 April 2030 for 2023/24 contributions. However, unless the contribution relates to the either of the previous two tax years, it is payable at the rate in force when the contribution is made, rather than that applying for the missing year.

Individuals reaching state pension age on or after 6 April 2016 who have missing years between 6 April 2006 and 5 April 2016 (2006/07 to 2015/16) can benefit from an extended window in which to pay contributions for those years. Contributions must be paid by 5 April 2025 and can be paid at the 2022/23 rate of £15.85 per week.

Making voluntary contributions is only worthwhile if, after making the contributions, you have at least ten qualifying years. If you have missing years, but will secure 35 qualifying years by the time you reach state pension age, there is no point in making voluntary contributions.

Paying Class 2 contributions voluntarily

A self-employed earner whose earnings are below the small profits threshold does not benefit from the National Insurance credit available to those whose profits are between the small profits threshold and the lower profits threshold. However, they do have the option to pay Class 2 contributions voluntarily. Where this option is available, at £3.45 per week for 2023/24, this is a much cheaper option than paying Class 3 contributions.

Following the abolition of Class 2 contributions from 6 April 2024, self-employed earners will still be able to make voluntary contributions at the 2023/24 Class 2 rate of £3.45 per week.

Like Class 3, voluntary Class 2 contributions must be paid within six years from the end of the tax year to which they relate. The contribution is paid at the highest rate in force in the period from the year to which it relates to the year in which it was paid.

An extended deadline of 5 April 2025 applies by which to make contributions for missing years between 2006/07 and 2015/16 inclusive. These can be paid at the 2022/23 rate of £3.15 per week.

Individuals making capital disposals do not pay capital gains tax if their net gains for the tax year (chargeable gains less allowable losses for the year) are covered by the annual exempt amount. This is essentially a personal allowance for capital gains tax purposes, and each individual is entitled to their own annual exempt amount.

The annual exempt amount is set at £6,000 for 2023/24 (down from £12,300 for 2022/23). It is further reduced to £3,000 for 2024/25. If it is not used in the tax year, it is lost – it cannot be carried forward.

If you are planning disposals that are likely to trigger a gain, it is important to consider the timing and, where the 2023/24 annual exempt amount remains available, whether to make the disposal before the 2023/24 tax year comes to an end on 5 April 2024.

Case study 1

Jacob has not made any disposals in 2023/24. He is planning on selling a residential investment property which will realise a gain of £20,000.

Jacob is single and pays tax at the higher rate.

By making the disposal before the end of the 2023/24 tax year, Jacob will be able to use his 2023/24 annual exempt amount of £6,000, leaving him with a gain of £14,000 on which capital gains tax of £3,920 (£14,000 @ 28%) is payable.

However, if he delays the disposal until after 5 April 2024, he will only benefit from an annual exempt amount of £3,000, leaving a chargeable gain of £17,000 on which capital gains tax of £4,760 will be due.

By making the disposal before 6 April 2024, Jacob is able to save tax of £840. He is also able to preserve his 2024/25 annual exempt amount.

Case study 2

Jane sold a flat in May 2023 realising a loss of £15,000. She plans to sell a painting which will realise a gain of £2,000.

If Jane sells the painting in 2023/24, the gain of £2,000 will be set against the loss of £15,000, reducing the net loss available to carry forward to £13,000. Her annual exempt amount for 2023/24 will be wasted.

If Jane makes the disposal in 2024/25, and this is her only disposal in that year, it will be sheltered by the annual exempt amount of £3,000. Jane will have losses from 2023/24 of £15,000 to carry forward to set against future gains.

Case study 3

John has made chargeable gains of £8,000 in 2023/24. He plans to sell a holiday home, realising a gain of £30,000.

If he sells the property before 6 April 2024, the full gain will be taxable as he has already used his annual exempt amount. However, if he waits until after 5 April 2024 to make the disposal, he will be able to use his 2024/25annual exempt amount to reduce the chargeable gain to £27,000, reducing his tax bill by £840 if he is a higher rate taxpayer.

Spouses and civil partners

Spouses and civil partners each have their own annual exempt amount. While they cannot pass unused annual exempt amounts to their partner, they can transfer assets between themselves at a value that gives rise to neither a gain nor a loss.

When planning asset disposals, spouses and civil partners need consider not only their own available annual exempt amount, but also that of their spouse/civil partner, and the rate at which they each pay tax.

If you have used your annual exempt amount for 2023/24 but your spouse has not, it may be worth transferring the asset to them prior to disposal and making the disposal before 6 April 2024 to utilise their 2023/24 annual exempt amount.

Case study 4

Julian and Jackie are married. Julian has used up his annual exempt amount for 2023/24, but Jackie has hers still available.

Julian is planning on selling a painting on which he expects to realise a gain of £5,800. By transferring the painting to Jackie for her to sell prior to 6 April 2024, the gain will be sheltered by Jackie’s annual exempt amount, so that no tax is payable.