We are fast approaching the end of the 2024/2025 tax year on the 5th April. The run up to the end of the tax year is always an ideal time to ensure that your personal, family and business affairs and your long-term financial plans are arranged as tax efficiently as possible.

Since the Labour Government came into power in July 2024, there have been a series of announcements that will, in the majority of cases, have an impact on your financial plan.

We have compiled an overview of these changes to help you navigate the upcoming tax year end effectively so that you can maximise your tax efficiency for the outgoing year and get your business and personal affairs prepared for the new tax year.

As always, if you would like advice specific to your personal circumstances please contact your adviser.

Pension Contributions

• Pension contributions are arguably the most effective way to save for retirement. Remember – you receive tax relief on personal contributions and employer contributions can result in corporation tax savings.
• Every individual has access to a pension contribution allowance of up to £60,000 per tax year, subject to income tapering restrictions. Any unused pension allowance can be carried forward into future tax years, for up to 3 years.
• The Money Purchase Annual Allowance (MPAA) was increased to £10,000 in April 2023 and has not been changed. However, this allowance, once triggered, cannot be carried forward, so make sure you utilise it if applicable each tax year.
• Higher and additional rate taxpayers can also use pension contributions to reduce their effective earnings and bring them into a lower tax band.

Maximise Your ISA Allowance

Consider making contributions before the tax year ends:

• Everyone has an Individual Savings Account (ISA) allowance of £20,000, meaning the maximum you can save into a cash ISA, a stocks and shares ISA (or both) is £20,000 in any given tax year.
• All children under the age of 18 receive a Junior ISA allowance, which is currently £9,000. If you have a child or grandchild with a Junior ISA and have not used all of the allowance, consider making a contribution.
• Gains and income within ISAs are free from any Income Tax or Capital Gains Tax.
• Use it or lose it – you can’t carry this allowance into the next tax year. If you are able to invest money before the end of the tax year, maximising your ISA allowance is a tax efficient way to save for your future.

Income Tax Bands

• The rates have stayed the same for this tax year with the Basic rate at 20%, higher rate at 40%, and additional rate at 45%.
• There are several ways that you can reduce your income level so that it falls below a tax band, such as: making pension contributions and using salary sacrifice (if your employer allows this).

Make Financial Gifts

• Each tax year, you can give away £3,000 without this money being included in the value of your estate for Inheritance Tax Purposes. You can also give as many £250 gifts per person as you like, provided you haven’t already given a gift to the same person as part of your £3,000 exemption.
• If you are planning on gifting to a friend or family member, make sure you do it ahead of the 5th April deadline to take advantage of this year’s tax allowance.
• Make sure you document any gifts with dates and amounts.

Dividend Rate & Annual Dividend Allowance

• On 6 April 2024 the annual dividend allowance was reduced from £1,000 to £500. It remains at £500 for the upcoming tax year. Dividends above this amount are subject to tax.
• The dividend rates remain fixed at 8.75% Basic Rate, 33.75% Higher rate and 39.35% for additional rate taxpayers.

Capital Gains Tax

• The CGT allowance for 2024/2025 is £3,000. It is important that you make use of the allowance before the end of the tax in order to reduce your tax bill.
• In the Autumn Budget, the Chancellor announced changes to Capital Gains Tax. The lower rate of CGT has increased from 10% to 18% and the higher rate of CGT has increased from 20% to 24%. The rate of Capital Gains Tax that applies to trustees and personal representatives increased from 20% to 24%.
• The Chancellor also announced changes to Business Asset Disposal Relief (BADR) and Investors Relief (IR). The lifetime limit for (IR) has been reduced to £1,000,000, and from April 2025, the rate of BADR and IR will rise from 10% to 14%, and then to 18% from 6 April 2026.
• The government has confirmed that the lifetime limit for BADR will remain at £1,000,000.

Deadline for Fixed and Individual Protection 2016

• The deadline for Fixed & Individual Protection 2016 is April 5, 2025. Please check with your Financial Adviser if Fixed or Individual Protection 2016 is applicable to you.
• If you already have protection, you may be entitled to a larger sum of tax-free cash, however you should check this with your Financial Adviser.