With 5 April 2025 fast approaching, it is crucial to organise your finances and plan for the upcoming tax year.
We have prepared this comprehensive checklist to help you make the most of the allowances and reliefs available in 2024/25. By reviewing your income, investments, and business strategies now, you can reduce your tax liabilities and set up a solid foundation for the future.
If you are in need of our comprehensive personal tax services, please use the contact form on the right and a member of our team will be in touch.
Understanding the Tax Year-End
The end of the tax year on 5 April 2025 is a key milestone. Early planning allows you to:
- Utilise Allowances Effectively: Ensure that you make the best use of your personal, savings, and dividend allowances.
- Plan Income Distribution: Consider deferring taxable income if your adjusted net income might exceed £100,000, thus preserving your full Personal Allowance.
- Prepare for Future Changes: With adjustments to tax thresholds and rates on the horizon, proactive planning is essential.
For a detailed overview of tax planning strategies, visit www.jackross.com/tax-planning.
Personal Tax Planning Considerations
Personal Allowance and Income Management
- Deferral of Taxable Income: The first £12,570 of income is tax-free via the Personal Allowance. However, for incomes exceeding £100,000, the allowance diminishes by £1 for every £2 earned over this threshold.
- Charitable Donations and Pension Contributions: These can help reduce your adjusted net income, preserving your Personal Allowance.
Utilising Key Allowances
- Savings Allowance: Basic and higher rate taxpayers benefit from a savings allowance (£1,000 for basic and £500 for higher rate, with none for additional rate taxpayers).
- Dividend Allowance: The annual dividend allowance is currently set at £500.
- Marriage Allowance: If both partners are basic rate taxpayers, you may transfer up to £1,260 of your Personal Allowance to your spouse or civil partner, potentially saving up to £252 in tax.
Additional Considerations
- PAYE Notice of Coding: For employees and pensioners, check your PAYE notice of coding to ensure the correct amount of tax is being deducted.
- Gift Aid Contributions: Claiming Gift Aid on charitable donations not only supports your chosen causes but can also extend your basic rate band by the grossed-up donation amount.
For more insights on personal tax matters, check out www.jackross.com/personal-tax.
Maximising Pensions and Retirement Planning
Annual Pension Contributions
- Maximise Contributions: Ensure you have made the maximum allowable contributions for 2024/25.
- Carry-Forward Unused Allowances: Review unused allowances from previous tax years (2022, 2023 and 2024) which may be utilised this year.
- Salary Sacrifice: Consider making salary sacrifice arrangements to enhance your pension contributions in a tax-efficient manner.
Supporting Family Members
- Pension Contributions for Family: It is possible to make net pension contributions for a family member (e.g. a non-earning spouse) up to £2,880 (or £3,600 gross) per year and even set up a Junior SIPP for your child. Our sister company, Concerva (www.concerva.com) can advise on tax efficient investments for you and your family.
For a detailed breakdown of pension strategies, visit www.jackross.com/pensions.
Investment and Capital Gains Tax (CGT) Planning
Tax-Free Investment Opportunities
- ISAs and Junior ISAs: Utilise your annual ISA allowance of £20,000 and consider setting up a Junior ISA for children (up to £9,000 per year) to enable tax-free growth.
Tax-Efficient Investments
- SEIS, EIS, VCT and SITR:
- SEIS: Offers 50% income tax relief on investments up to £100,000 and provides additional CGT relief.
- EIS: Provides 30% income tax relief on investments up to £1m with potential for deferred capital gains tax, provided shares are held for at least three years.
- VCT: Offers 30% income tax relief on subscriptions up to £200,000 along with tax-free dividends and capital gains.
- Social Investment Tax Relief (SITR): Encourages investment in social enterprises by offering 30% income tax relief on investments up to £1m.
Capital Gains Tax Strategies
- Annual Exemption: Ensure you use your annual CGT exemption of £3,000 as it cannot be carried forward.
- Inter-Spousal Transfers: Assets transferred between spouses or civil partners usually do not incur a CGT charge, allowing you to make full use of both partners’ exemptions.
- Relevant Reliefs: Review potential reliefs such as Business Asset Disposal Relief (BADR) – note that from 6 April 2025, the CGT rate under BADR will increase from 10% to 14%, and later to 18% on 6 April 2026.
For further information on investment planning and CGT, see www.jackross.com/investments and www.jackross.com/capital-gains-tax.
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Inheritance Tax and Estate Planning
Structuring Gifts and Transfers
- Normal Expenditure on Gifts: Regular gifts made from your income can be exempt from Inheritance Tax (IHT) if they form part of your normal expenditure.
- Gifts on Marriage: Lifetime gifts on marriage are exempt from IHT (for example, £5,000 for a child, £2,500 for a grandchild, and £1,000 for other individuals such as nieces or nephews).
- Trusts and Family Investment Companies: Consider setting up trusts or family investment companies to manage your estate tax-efficiently.
- Will Review: Ensure that your Will is both up to date and tax efficient.
Future Changes
- APR/BPR Adjustments: From 6 April 2026, the relief available on qualifying agricultural and business assets will be capped, so it may be beneficial to review your current succession planning strategies now.
- From April 2027, unused pension funds may be included in IHT calculations. Review drawdown strategies at jackross.com/pension-inheritance.
Business Tax Planning Strategies
For Sole Traders and Partnerships
- Basis Period Reform: Understand the implications of the Basis Period Reform and adjust your planning accordingly.
Incorporation and Capital Allowances
- Incorporation Benefits: For some businesses, incorporating can lead to significant tax efficiencies.
- Capital Allowances: If you plan to purchase new equipment, consider doing so before 5 April 2025 to maximise your capital allowances and benefit from the Annual Investment Allowance, which remains at a £1m limit.
- Benefits in Kind (BIK): Changes in classification (for example, double cab pick-up trucks no longer qualifying as vans for tax purposes after 6 April 2025) could impact your tax liabilities.
- Employer’s National Insurance Contributions: Be aware of the upcoming reduction in the employer’s NIC threshold from £9,100 to £5,000 and the corresponding increase in tax rates.
Research and Development (R&D) and Corporation Tax
- R&D Tax Credits: Profit-making companies should continue to benefit from R&D relief (15p per £1 of qualifying expenditure).
- Corporation Tax Rates: Medium-sized companies may want to re-evaluate their profit extraction strategy in light of the current Corporation Tax rates – 25% for companies with profits above £250,000 and 19% for smaller companies.
For business tax planning and capital allowance advice, check www.jackross.com/business-tax-planning and www.jackross.com/capital-allowances.
Preparing for Future Tax Changes
Long-term tax planning is essential in an ever-evolving fiscal landscape. Consider the following:
- Adjusting Strategies for Future Increases: With anticipated changes to tax rates and thresholds (e.g. additional rate tax on high incomes and alterations in child benefit rates from 6 April 2025), plan ahead to avoid any unexpected liabilities.
- Regular Reviews: Annual reviews of your tax planning strategies can ensure you remain compliant and continue to optimise your financial position.
Conclusion
Effective tax year-end planning for 2024/25 can save you money and prevent last-minute financial scrambles. By taking advantage of allowances, tax reliefs, and efficient planning strategies – whether it is through personal, pension, investment, or business tax planning – you can secure a better financial future.
Jack Ross Chartered Accountants is here to support you. For a personalised review of your circumstances and detailed action plans, please contact our team or visit www.jackross.com. Additional articles on related topics are available at:
• Pension Strategies – www.jackross.com/pensions
• Business Tax Planning – www.jackross.com/business-tax-planning
• Inheritance Tax Planning – www.jackross.com/inheritance-tax-planning
Take control of your financial future by planning ahead today.