With the tax year-end fast approaching, make sure you’re taking full advantage of your tax-saving opportunities before it’s too late!
Some key reliefs and allowances are set to change next tax year, so make the most of them while you still can. Read on to maximise your savings for 2024/25.
1. Take advantage of tax-free pension contributions
The standard amount that an individual can set aside tax-free each year for a pension is £60,000 - this is subject to income limits and any unused relief in the prior three tax years can be brought forward. Exceeding the available annual allowance will mean a tax charge arises, so those who think they may be affected should review their position. Higher rate tax repayments can be made on the annual tax return.
2. Use your ISA allowances
UK residents aged 18+ can invest up to £20,000 each and parents can fund a junior ISA or Child Trust Fund with up to £9,000 per child for 2024/25 – making a total annual allowance of £58,000 for a family of four earning tax-free interest! Children will automatically have access to the funds in their ISA when they reach age 18 but ISAs are a useful vehicle for building up funds to support them through higher education. If you’re over 18 and under 40 you can also use some of your ISA allowance to invest in a Lifetime ISA to help with buying your first home. The lifetime ISA limit is £4,000 in 2024/25 and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. Once opened you can continue to pay into a lifetime ISA up to age 50.
3. Avoid the child benefit clawback
Child benefit is clawed back where annual taxable income (or the taxable income of a partner) exceeds £60,000. (Up from £50,000 for 2023/24).
Making personal pension contributions, Gift Aid donations or exchanging salary in return for employer pension contributions can reduce your taxable income to keep it below the £60,000 threshold.
4. Use Capital Gains Tax (CGT) annual exemptions
Everyone can realise capital gains up to the annual exemption tax-free – £3,000 in 2024/25. One way to make the most of it is to consider transferring assets between spouses/civil partners to maximise tax-free gains.
5. Match capital gains and losses to reduce your tax bill
Capital gains and losses are aggregated on a tax year basis, so if you have assets e.g. shares sitting at a loss, and also a gain, these can be combined to enable assets to be sold without incurring CGT. Consideration needs to be given to not wasting the annual exemption.
6. Consider paying yourself a dividend
It is generally more tax-efficient overall to withdraw profits from your company by way of dividends rather than salary.
Several factors are involved, and it is always worth reviewing the position. The dividend allowance (the amount of dividend that can be received at 0% tax) is £500 for 2024/25 and 2025/26. Ensure you have taken your tax free dividend for 2024/25.
7. Make gifts to use annual inheritance tax (IHT) allowances and consider IHT position as a whole
With the standard NRB currently at £325,000 and main residence NRB at £175,000, reducing the value of the part of your estate that is above the nil rate bands (NRB) will save you IHT on your passing. Consider giving assets you do not need to other family members now. Gifts to a spouse or civil partner to enable them to use up their nil rate band are tax-free, and gifts to other family members can also be tax-efficient over time. Care needs to be taken when gifting non cash assets, so that no lifetime taxes (e.g. Capital Gains Tax) are triggered. Most lifetime gifts to individuals that are not covered by a lifetime exemption do not immediately trigger IHT and become totally exempt if you survive for seven years. These are known as Potentially Exempt Transfers.
Some gifts leave your estate at day one and you can give away up to £3,000 a year (this can be carried forward if unused for one year but thereafter is lost). Other gifts that leave your estate immediately include £250 to as many individuals as you like in a year, gifts on marriage (to certain limits), and gifts out of income. More people are now falling into the IHT net due to the freezing of NRBs and increase in value of property etc. If you are close to or above the NRBs, we would recommend an IHT review to ascertain your current position and see what can be actioned to mitigate any possible IHT liability. With the upcoming potential changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) in April 2026 and pension funds in April 2027, it is advisable to review Your IHT position.
8. Consider SEIS/EIS/VCT investments
The Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) all offer tax benefits but are really only suitable for experienced business owners and investors. Under the SEIS, an individual can invest up to £200,000 in start-up enterprises in a tax year and claim income tax relief at 50% irrespective of his or her marginal rate of tax. Investments in qualifying EIS companies (for example, certain companies listed on AIM or that are unlisted) attract income tax relief at 30% on a maximum annual investment of up to £1m for qualifying individuals. This limit is doubled to £2,000,000 provided any amount over £1 million is invested in “Knowledge Intensive Companies”.
Investments in VCTs provide income tax relief at 30% on qualifying investments of up to £200,000 and dividends received from the units are tax-free. In addition, the VCT can buy and sell investments without suffering capital gains tax (CGT) within the trust and there is no CGT payable on any gain made when you sell the VCT units. Care needs to be taken as investments can go down as well as up, and financial advice should be sought.
9. Plan for 2025/26
Plan for 2025/26 by checking your tax codes. This can be done by logging into your personal tax account.
