With the tax year ending on 5 April 2025, now is the time to optimise your finances, reduce tax liabilities, and maximise savings. Here are key financial planning tips to consider before the deadline:
1. Maximize Your ISA Allowance (£20,000)
- Utilize your Stocks & Shares ISA or Cash ISA allowance before it resets.
- A Lifetime ISA (LISA) allows up to £4,000 per year, with a 25% government bonus (ideal for first-time buyers or retirement).
✅ Tip: ISA earnings are tax-free, so maximize contributions to protect investments from tax.
2. Use Your Pension Annual Allowance (£60,000)
- Contributions to pensions receive tax relief at your highest income tax rate.
- The Annual Allowance is £60,000 or 100% of your earnings, whichever is lower.
- Carry forward any unused pension allowance from the previous three tax years if eligible.
✅ Tip: Higher earners should check for tapered annual allowance reductions and make tax-efficient contributions.
3. Utilise Your Capital Gains Tax (CGT) Allowance (£3,000)
- The CGT allowance is only £3,000 for 2024/25 (down from £6,000 in 2023/24).
- Consider selling assets before 5 April to use the exemption.
- Offset gains by realizing losses on underperforming investments.
✅ Tip: Married couples can transfer assets to use both partners’ allowances (up to £6,000 total).
4. Optimise Dividend Allowance (£500)
- The tax-free Dividend Allowance is just £500 for 2024/25.
- If you receive dividends from stocks or a business, consider shifting income to a lower-taxed partner.
✅ Tip: Holding dividend-producing assets within an ISA or pension shields them from tax.
5. Reduce Inheritance Tax (IHT) Liability
- Use the £3,000 annual gift exemption to pass on wealth tax-free.
- Make gifts out of surplus income to reduce your estate’s taxable value.
- Consider putting assets into a trust or charity donations for tax efficiency.
✅ Tip: If your estate exceeds £325,000 (or £500,000 with the residence nil-rate band), IHT planning is crucial.
6. Claim Tax-Deductible Expenses & Allowances
- Self-employed? Deduct eligible expenses like home office costs, equipment, and travel.
- Employees? Claim tax relief on professional fees, work uniforms, or mileage.
- Use the Marriage Allowance if one partner earns below the Personal Allowance (£12,570).
✅ Tip: Check HMRC for overlooked allowances that could reduce your tax bill.
7. Plan for Child Benefit and High-Income Tax Charges
- If earning over £60,000, you face the High Income Child Benefit Charge.
- Reduce taxable income by making pension contributions or charitable donations.
✅ Tip: Adjust your income below £60,000 to keep full Child Benefit.
8. Consider Salary Sacrifice for Tax Efficiency
- Reduce taxable income by contributing to:
- Pensions (boosts tax relief)
- Cycle-to-Work schemes
- Electric vehicle salary sacrifice schemes
✅ Tip: These reduce taxable earnings and National Insurance contributions.
9. Review your investment portfolio for tax efficiency
- Ensure investments are held in tax-efficient wrappers like ISAs or pensions.
- Rebalance portfolios to optimize risk and returns.
- Consider Venture Capital Trusts (VCTs) or Enterprise Investment Schemes (EIS) for tax relief if you have a high tax liability. This is relevant for knowledgeable and experienced investors.
✅ Tip: Holding tax-efficient investments can reduce income tax and CGT exposure.
10. Use charitable donations for tax relief
- Donations via Gift Aid increase the donation’s value and provide tax relief.
- Higher-rate taxpayers can claim further tax relief via Self Assessment.
Making the most of tax allowances before 5 April 2025 can reduce liabilities and boost savings. Whether it’s ISAs, pensions, capital gains, or inheritance tax, proactive planning ensures you keep more of your wealth.
To learn more about how we can help you, please book a free initial consultation with one of our Financial Advisers.
Disclaimer
This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.