Are you ready for the tax year end?
The 2024/25 tax year end is on 5 April 2025, so now is the time to ensure you’re making full use of available tax allowances and reliefs before the tax year end. Here’s what to check before the deadline:
Tax year end – Personal Allowances & Income Management
Make full use of your £12,570 personal allowance. If you earn below this threshold, consider bringing forward income from dividends, pensions, or rental profits.
If your income exceeds £100,000, explore pension contributions to mitigate the personal allowance taper effect, which can increase your effective tax rate to as much as 60%..
If your spouse earns below the personal allowance and you are a basic-rate taxpayer, consider transferring up to £1,260 of their unused allowance through the Marriage Allowance, saving up to £252 in tax.
Investments & Tax-Efficient Saving
The ISA allowance remains at £20,000—use it before 5 April to protect savings and investments from tax. It is rumoured that the Chancellor may reduce the £20,000 annual ISA limit from April 2025.
Pension Contributions
Pension contributions remain highly tax-efficient. You can contribute up to £60,000 (or 100% of earnings) with tax relief, and higher earners should check if they can use the carry forward rule to use unused allowances from the past three years.
The Chancellor may reduce the higher tax relief on pension contributions at some point during the current parliament. In which case it makes sense to make the most of the present higher rate reliefs while they are still available.
There is still time to contact your pension’s advisor to work out possible additional contributions for 2024-25.
Dividend & Savings Tax Planning
The dividend allowance has been slashed to £500 this year but it may still benefit you to vote dividends that takes your taxable income up to the basic rate income tax threshold for 2024-25.
The personal savings allowance provides £1,000 of tax-free interest for basic-rate taxpayers and £500 for higher-rate taxpayers. Make sure your savings are structured efficiently.
Capital Gains & Inheritance Tax Planning
The capital gains tax exemption is now just £3,000, so if you need to sell assets, consider doing so before 5 April to minimise tax exposure.
To reduce inheritance tax liabilities, use your £3,000 annual gifting exemption before the tax year ends.
Time is running out if you wish to make changes before the tax year end — act now to ensure that you take all your actions before 5 April 2025!
