Year-End Tax Guide 2023/24: Personal Allowances and Reliefs
While the first £1,000 of income from dividends in 2023/24 is tax-free, the UK govt won't be as generous in the coming tax year.
Minimising Your Personal Tax Bill
The personal allowance is £12,570. Non-dividend income above this threshold is taxed at rates from 20% to 45% (or 19% to 47% in Scotland).
A higher marginal tax rate may be payable between £100,000 and £125,140 as the personal allowance reduces by £1 for every £2 earned above £100,000. This means those with non-savings and savings income in this band have an effective tax rate of 60% (63% in Scotland) for this tax year. You may be able to transfer £1,260 of your unutilised personal allowance to your spouse or civil partner if certain conditions are met.
This is known as marriage allowance and could save couples up to £252 in income tax in the tax year.
Tax on Savings and Investments
The personal savings allowance allows a basic-rate taxpayer to receive up to £1,000 in savings income tax-free. A higher-rate taxpayer can get up to £500 in savings income without any tax being due. There is no relief for additional-rate taxpayers.
If you earn less than £17,570 annually, you may be able to receive up to £5,000 in interest without paying tax on it. This is known as the starting rate for savings.
The first £1,000 of income from dividends in 2023/24 is tax-free, while income from dividends that exceeds this amount is usually taxed at rates of 8.75%, 33.75% or 39.35%. In 2024/25, this will be halved to £500, so use the most of your allowance while you can.
Key Considerations
- Are you and your spouse or civil partner using all of your personal allowance? If not, consider the availability of the marriage allowance.
- Are there opportunities to utilise any unused allowances this tax year?
- Can you reduce your exposure to high marginal tax rates by retaining your full personal allowance? For example, by paying amounts earned above £100,000 into a pension scheme.
- Is it worth considering tax-efficient alternatives to a bonus or salary increase?
- Can you utilise rent-a-room relief which is £7,500 for individuals or £3,750 for co-owners?
Year-End Tax Guide 2023/24
If you would like to access our full year-end tax guide, simply click here to view the PDF.
Alternatively, you can view an area specific mini blog from the list below:
1. ISAs
6. Business Asset Disposal Relief
8. Tax-Efficient Staff Benefits
10. VAT
11. Penalties
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