Here are some practical steps and tips to ensure you’re fully prepared for the upcoming tax year end.
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Maximise your ISA allowance
The Individual Savings Account (ISA) is one of the most tax-efficient ways to save or invest. For the 2024/25 tax year, you can contribute up to £20,000 across your Cash and Stocks & Shares ISAs. However, any unused allowance doesn’t roll over to the next tax year, so it’s a case of “use it or lose it.”
Tips:
- If you’re unsure about market conditions, consider drip-feeding your contributions into a Stocks & Shares ISA through monthly instalments.
- For couples, maximise allowances by using both partners’ ISA limits.
- If you’re new to ISAs, remember that withdrawals from Cash ISAs can usually be replaced within the same tax year without affecting your allowance.
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Review pension contributions
Pensions remain one of the most effective ways to save for retirement while benefiting from generous tax relief. Each year, you can contribute up to 100% of your earnings (capped at £60,000 for most people) and still receive tax relief at your marginal rate.
Tips:
- Check if your employer offers salary sacrifice, allowing you to boost your pension while saving on National Insurance contributions.
- Use HMRC’s online calculator to estimate how much tax relief your contributions will attract.
- If you’ve had fluctuating income in recent years, look into the carry forward rules for unused annual allowances.
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Consider Capital Gains Tax (CGT) strategies
The tax-free allowance for Capital Gains Tax (CGT) is now just £6,000 for the 2024/25 tax year. With this significantly reduced threshold, it’s crucial to plan ahead if you’re planning to sell assets such as shares, property (other than your main home), or other investments.
Tips:
- Use the “bed and ISA” strategy: sell assets and repurchase them in an ISA to shelter future gains from tax.
- For couples, transferring assets between spouses before a sale can help maximise the use of two CGT allowances.
- Consider spreading disposals over two tax years if possible, to make use of the next year’s allowance.
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Check your personal tax allowances
From the Personal Savings Allowance to the Dividend Allowance, make sure you’re using all the reliefs and exemptions available to you. The Dividend Allowance, for example, is just £1,000 this year, so understanding how to structure your income can save you money.
Tips:
- Keep track of dividends and savings income throughout the year to avoid surprises at the end of the tax year.
- If you’re a higher-rate taxpayer, explore tax-efficient wrappers like ISAs to protect investment income.
- Business owners should consider a tax-efficient mix of salary and dividends for drawing income.
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Plan charitable donations
Charitable giving is not only a way to support causes close to your heart but also a means to reduce your tax bill. Under Gift Aid, donations to UK charities can boost the charity’s income and give you tax relief if you’re a higher-rate taxpayer.
Tips:
- Keep a log of donations made throughout the year, including Gift Aid declarations.
- For significant donations, consider spreading them across multiple tax years to maximise relief.
- Review your overall giving strategy to align with your long-term financial goals.
Don’t wait until march
Waiting until the eleventh hour can lead to missed opportunities and unnecessary stress. By acting now, you can take advantage of the full range of tax reliefs and allowances while ensuring you’re in the best financial position as the new tax year approaches.
At GSI Wealth Management, we’re here to make tax planning straightforward. Whether you need advice on pensions, investments, or tax-efficient strategies, our team is ready to help. Let’s start 2025 on the right foot—contact us today to schedule your tax planning review.
Here’s to a financially confident new year!
