What is a Tax Year End?
The UK Tax Year runs from 6th April until the 5th April of the following year. HMRC uses this timeframe to calculate your liabilities for the year, whether it’s Income Tax, Corporation Tax or Capital Gains Tax.
For example: The tax year 2023/2024 began on 6th April 2023 and will end on 5th April 4.
The Importance of the Tax Year End
The tax year end marks the deadline for ensuring you have your finances in order and squared up your accounts. However, missing this deadline can result in penalties, interest charges or even legal action from HMRC.
What You Should Do Before the Tax Year End
1. Maximise Your ISA Allowance
Individual Savings Accounts (ISAs) are a tax-efficient way to save. You won’t pay tax on interest, dividends or capital gains within an ISA. Each tax year, there is also an annual limit to how much you can deposit, currently set at £20,000. However, any unused portion won’t carry over to the next year.
2. Top Up Your Pension Contributions
The more you contribute, the more tax relief you’ll receive. Basic-rate taxpayers receive 20% tax relief on their contributions, meaning every £800 contributed results in £1,000 in your pension pot. So you can contribute up to £40,000 per year, or 100% of your income, whichever is lower.
3. Consider Your Capital Gains Tax (CGT) Allowance
The CGT allowance for 2023/2024 is £12,300. If you’re planning to sell any investments, shares or property, it’s worth making use of this allowance before the end of the tax year. Additionally, any gains above this threshold will be subject to CGT.
How Much Income Tax Do You Pay?
The amount of Income Tax you pay depends on your earnings. Moreover, the UK has several tax rates for different income levels:
- Personal Allowance: You pay no tax on the first £12,570 you earn.
- Basic Rate: You pay 20% on earnings between £12,571 and £50,270.
- Higher Rate: You pay 40% on earnings between £50,271 and £125,140.
- Additional Rate: You pay 45% on earnings above £125,140.
Self Assessment Deadlines
Keep these deadlines in mind if you need to file a Self Assessment:
- 5th October: Deadline to register for Self Assessment.
- 31st October: Deadline for submitting a paper tax return.
- 31st January: Deadline for filing your online tax return and paying any tax owed.
Missing these deadlines can result in penalties, so you must file on time.
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