What to consider this tax year end as a self-employed professional

Duncan Craze, Head of Financial Advice at Contractor Wealth, notes, “Effective tax planning is fundamental for freelancers. As the tax year end approaches, it’s crucial to utilise available tax incentives. ISAs, pensions, and capital gains considerations are key areas where informed decisions can lead to substantial savings.”

As we move into the new tax year there are several changes focused on self-employed workers to consider, including around national insurance.

National Insurance Contributions for the Self-Employed

From 6 April 2024, the Class 4 National Insurance contribution rate for the self-employed will decrease from 9% to 8%.

Class 2 National Insurance contributions will no longer be due for those with profits below £6,725, although voluntary payments can maintain entitlement to certain state benefits.

ISA Allowances

The ISA allowance for 2023/24 is £20,000, and it's crucial to make the most of it before 5 April. Investments in ISAs grow free from personal income tax and capital gains tax. Options include cash ISAs, stocks & shares ISAs, and Lifetime ISAs, and you can distribute your allowance across these options as you see fit.

For parents, consider junior ISAs (JISA) for children, with similar tax benefits and an annual investment limit of £9,000. Remember, if you don’t use your ISA allowance by the deadline, it's lost forever.

Pension Contributions

Pension contributions offer another avenue for tax savings. You can contribute to multiple pension schemes and receive tax relief up to your annual allowance, which for 2023/24 is 100% of your earnings, capped at £60,000.

Contributions made by 5 April can qualify for basic rate tax relief, with higher-rate relief claimable through your tax return.

Inheritance Tax Planning

Don’t overlook potential capital gains tax and inheritance tax (IHT) planning. You can realize gains of up to £6,000 without incurring capital gains tax, and gifts of up to £3,000 fall outside your estate for IHT purposes. Timing these actions before the tax year end can be beneficial.

Preparing for the tax year end involves strategic decision-making to optimize your tax position. As freelancers, embracing these opportunities can lead to significant tax savings.

Speak to an expert

Contractor Wealth, in partnership with IPSE, is committed to guiding you through these financial choices.

For expert assistance in navigating these tax-saving strategies and ensuring you don’t pay unnecessary tax, contact Contractor Wealth. Book your free-initial consultation by calling 01420 592 667 or visiting https://www.cmmemortgages.com/cw-ipse/

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.
You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.
By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and (ii) your current and future entitlement to means tested benefits (if any) may be affected.