With another year having melted away, it’s time to turn your attention to goals and ambitions for 2023.

Whether you have aspirations for your career or your family, you should make sure that your wealth is ready and well-organised to keep driving you towards your targets.

So, here are five simple yet highly effective things you can do to prepare your finances for the new year.

1. Consider how your income will be affected by the changes to the Income Tax thresholds

One of the major changes that will likely affect you as we move into the new year is the changes to the additional-rate Income Tax band.

In November, the new chancellor announced that the additional-rate Income Tax threshold would be reduced from £150,000 to £125,140.

This means that the portion of your income between £125,140 and £150,000 will now also be liable for the 45% additional rate of Income Tax, rather than the 40% higher rate. This will add up to an increase to your tax bill of around £1,200 each year if you’re already an additional-rate taxpayer.

Meanwhile, if your annual income falls between £125,140 and £150,000, you’ll find yourself paying the 45% rate for the first time.

According to SQaF, the average League One player earns up to around £130,000 a year. So, for a player earning this amount, they’ll now see the 45% tax rate applied to £4,860 of their wages – an increase to their tax bill of just under £250 a year.

While these may not sound like significant sums, it will reduce your net income, especially considering that the changes could remain in place for many years.

In turn, this will reduce the amount of money you have available to save and invest as you might want to. As a result, it’s important to make sure that your finances are organised before April 2023 when this change comes into effect so that you’re still able to afford the lifestyle you want.

You may also want to consider options to reduce your Income Tax bill. For example, certain investments such as those in Venture Capital Trusts (VCTs) or Enterprise Investment Scheme (EIS) companies are eligible for tax relief.

These are high-risk investment options, so make sure you speak to us before you invest.

2. Check that all your paperwork is in order for your self-assessment tax return

As you are most likely a higher- or additional-rate taxpayer, you’ll need to complete a self-assessment tax return. So, with the deadline for completing these fast-approaching on 31 January, you’ll want to start preparing all your paperwork so you don’t find yourself scrambling to collate all the necessary information at the end of the month.

If you miss the deadline, you’ll face interest on outstanding payments, typically from 1 February. You may also face late filing penalties if you still haven’t completed your return by the end of February.

Start now by checking that all the paperwork and information you’ll need is organised and to hand so that you only have to pay the tax you owe, rather than any interest or penalties.

3. Prepare for the cost of any tax owed on your P11D

A cost that can be easy to forget about is the tax bill on any benefits your club may have declared on a P11D tax form.

On a P11D form, your club will have declared any taxable benefits they’ve paid for, such as agents’ fees or perhaps protection such as sports injury cover. They’ll have then submitted this before the July deadline in 2022.

However, the resulting tax bill will have a deadline of 31 January. So, if you haven’t paid this bill already and you didn’t arrange to do so pro rata throughout the year, you’ll need to prepare for the cost in the new year.

This bill can easily be in the tens of thousands of pounds, so make sure you have money available to settle it before the deadline. Otherwise, you may have to pay a penalty on top of the tax bill itself.

4. Use up your ISA Allowance – or at least know what to do with it

If you have any remaining ISA Allowance, using it early on in 2023 or at least having a plan for what you will do with it can be a sensible option.

ISAs are tax-efficient savings and investment accounts. You can save your money in a Cash ISA, invest it through a Stocks and Shares ISA, and even lend it through an Innovative Finance ISA. Any interest or investment returns you receive will then be entirely free from Income Tax and Capital Gains Tax (CGT).

Each tax year, you can save and invest up to the ISA Allowance. This figure stands at £20,000 in 2022/23. However, you’ll lose any unused ISA Allowance you have when the new tax year starts on 6 April when it resets. That means you need to use up as much as you want before this happens.

As the ISA Allowance counts for individuals, your partner or spouse can use it, too. Between you, that means you could save or invest up to £40,000 before the end of the tax year in April.

So, put yourself in the best position for 2023 by using up your ISA Allowance, or developing a plan for how you will use it at the very least.

5. Sell assets to use your Capital Gains Tax exemption

If you’re approaching the end of your career or already retired from playing football, you may be intending to use the value you’ve built up in investments to provide part of your income.

In this case, it may be worth making sure you’ve fully used up your Capital Gains Tax (CGT) annual exempt amount.

This tax is payable on any gains which products that are subject to CGT have made when you come to sell them, such as stocks and shares not held in an ISA. As you are most likely a higher- or additional-rate taxpayer, your CGT rate will be 20% – or 28% if you’re selling property that isn’t your main residence.

But before CGT is due, you also have an annual exempt amount that allows you to realise gains without having to pay tax. In 2022/23, the exempt amount is £12,300.

So for example, imagine that you had bought £100,000 of shares that you now sell for £120,000. That’s a gain of £20,000, which could be subject to CGT. But if you have your full £12,300 CGT exempt amount remaining, that would mean just £7,700 of your gains would be liable to tax.

If you’re at a stage of your life where you’re looking to start drawing on the value of your investments, maximising this exemption can be a helpful option.

Much like the ISA Allowance, you will lose any remaining CGT exempt amount when the new tax year starts on 6 April. That means it may be a sensible choice to sell investments with gains of up to the £12,300 threshold to make the most of it.

The CGT annual exempt amount will also be reduced down to £6,000 when the new tax year starts in April 2023, and will fall even further to £3,000 in April 2024. So, it may be worth using up as much of the larger 2022/23 exemption as possible before this happens.

Speak to us

At ProSport, we’re a team of financial planning experts who specialise in working with professional footballers.

So, if you’d like any help preparing your finances for 2023, please get in touch.

Email enquiries@prosportwealth.co.uk or call 01204 602909 to find out what we can do for you.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

All contents are based on our understanding of HMRC legislation, which is subject to change.

Enterprise Initiative Schemes (EIS) and Venture Capital Trusts (VCT) are higher-risk investments. They are typically suitable for UK-resident taxpayers who are able to tolerate increased levels of risk and are looking to invest for five years or more. Historical or current yields should not be considered a reliable indicator of future returns as they cannot be guaranteed.

Share values and income generated by the investments could go down as well as up, and you may get back less than you originally invested. These investments are highly illiquid, which means investors could find it difficult to, or be unable to, realise their shares at a value that’s close to the value of the underlying assets.

Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.