Tax Year-End Planning: What You Need to Consider Before 6th April

By Samuel Mather-Holgate 

As we approach the end of the 2024/25 tax year on 5th April, time is running out to make the most of your tax allowances and reliefs. This is a critical period for both individuals and business owners to ensure they have maximised tax-efficient savings, used their allowances effectively, and prepared for any upcoming changes in the new tax year.

Key Financial Planning Areas to Review Before Tax Year-End

1. Maximising Your ISA Allowances

• The ISA allowance remains at £20,000 per individual for the 2024/25 tax year.
• Contributions must be made before 6th April 2025, as any unused allowance cannot be carried forward.
• Types of ISAs to consider:
  • Cash ISAs – Tax-free interest on savings.
  • Stocks & Shares ISAs – Invest in markets with no capital gains tax (CGT) or income tax.
  • Lifetime ISAs (LISA) – For first-time buyers or retirement savings, with a £4,000 annual limit (included in the £20,000 total) and a 25% government bonus.
  • Junior ISAs – Up to £9,000 per child can be saved tax-free.

2. Pension Contributions: Use It or Lose It

• The annual allowance for pension contributions remains at £60,000, but can be reduced for high earners due to tapered annual allowance.
• Carry forward: If you have unused pension allowances from the previous three tax years, you may be able to contribute more.
• Personal contributions benefit from tax relief at your highest marginal rate, making this one of the most tax-efficient ways to save.
• Business owners can make employer pension contributions to reduce corporation tax liability.

3. Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS)

• VCTs and EIS investments offer significant tax advantages:
  • VCTs: 30% income tax relief (subject to conditions) and tax-free dividends.
  • EIS: 30% income tax relief and potential CGT deferral.
• These schemes can be high risk, so they should align with your investment strategy and risk tolerance.

4. Capital Gains Tax (CGT) Planning

• The CGT annual exemption remains at £3,000 per individual.
• If you haven’t used your CGT allowance, consider realising gains before 6th April to utilise this exemption.
• Gifting assets to a spouse before sale can allow for double the CGT exemption.

5. Inheritance Tax (IHT) Planning and Gifting

• Each person has an annual gifting exemption of £3,000 – this can be used before 6th April to reduce your taxable estate.
• Gifts of up to £250 per individual to multiple people are also exempt.
• Regular gifting from surplus income may also be IHT-efficient.

6. Reviewing Drawdown Income for Next Year

• If you’re in pension drawdown, now is the time to review your income strategy for the new tax year.
• Consider managing withdrawals tax-efficiently to avoid unnecessary income tax charges.
• Adjust income levels to make the most of your personal allowance and avoid breaching higher tax bands.

Post-April 2025: Key Tax Changes to Be Aware Of

• Corporation Tax: Remains at 25% for profits over £250,000, with a small profits rate of 19% for profits under £50,000.
• Pension Death Benefits: Changes to inheritance tax treatment of pension death benefits coming into effect from April 2027.
• Inheritance Tax: Nil-rate band frozen at £325,000 and residence nil-rate band at £175,000 until April 2028.
• Child Benefit Changes: Adjustments to income thresholds for the High-Income Child Benefit Charge from April 2025.
• Capital Gains Tax: Rates increasing to 18% (basic rate) and 24% (higher rate) from October 2024.

What Needs to Be Done Before and After the Tax Year-End?

Before 6th April: ✔️ Maximise ISA contributions. ✔️ Use pension allowances and carry forward if applicable. ✔️ Take advantage of VCT/EIS investment tax reliefs. ✔️ Use CGT exemptions if selling assets. ✔️ Make tax-free gifts to reduce IHT exposure. ✔️ Plan drawdown income for the next tax year.

After 6th April: ✔️ Review income strategies for the new tax year. ✔️ Adjust pension contributions based on earnings. ✔️ Check eligibility for tax-efficient savings allowances. ✔️ Stay updated on tax changes affecting income and capital gains.

Don’t Miss These Tax-Efficient Opportunities

The tax year-end is a crucial time for financial planning. Missing key deadlines means losing valuable allowances and reliefs that won’t carry over. Taking action now can help you reduce tax liabilities, increase savings, and ensure a tax-efficient retirement strategy.

If you need tailored advice on how best to optimise your finances before the tax year-end, contact us today to discuss your options.