As the personal tax year draws to a close on 5 April 2025, now is the perfect time to review your finances and take advantage of tax-saving opportunities. A little planning before the deadline can help you reduce your tax liability and make the most of your allowances. Here are some ideas to consider before the tax year ends:
Maximise Your ISA Allowance
ISA growth and withdrawals are tax-free, this is a powerful way to protect your savings from tax. For the 2024/25 tax year, you can invest up to £20,000 into ISAs. This is a use or lose allowance, meaning any unused allowance does not roll forward.
Transfer of Married Couples Allowance
If you missed the Martin Lewis show, apparently there are 2 million couples missing out on a £1,260 tax break. This is a claim you can make if one of the couple (married or civil partnership) is a non-tax payer and one is a basic rate tax payer. The non taxpayer can transfer £1,260 of their allowances to the tax paying person, therefore reducing the tax bill and potentially a refund. If you have been eligible since 2020/21, you can backdate the claim. This may not be relevant to you personally, but it is worth looking at your parents, and those that are retired. Personal allowances have been frozen, and more pensioners are falling into tax, with private pensions and investment income, transferring the married couples allowance could give them back £252 a year in tax.
Use Your Capital Gains Tax (CGT) Allowance
If you have investments that have increased in value (not including residential property), consider using your Capital Gains Tax (CGT) allowance before it resets. The CGT allowance for 2024/25 is £3,000, and any gains above this will be subject to tax. Selling assets to realise gains within the allowance can help reduce your overall tax liability. If you have losses, these can be offset against gains to further minimise your tax bill.
Take Advantage of Your Annual Gift Allowance
Making use of your annual gift allowance is another smart move. You can gift up to £3,000 each tax year without it counting towards your estate for inheritance tax purposes. If you didn’t use last year’s allowance, you can carry it over, potentially allowing you to gift up to £6,000 this tax year. This can be a tax-efficient way to pass on wealth to family members or loved ones.
Maximise Pension Contributions
Contributing to your pension remains one of the most tax-efficient ways to save, as pension contributions qualify for tax relief at your highest rate of income tax. For further advice on this, please contact an IFA, legally registered to give you investment advice.
Make the Most of a Lifetime ISA (LISA)
If you’re between 18 – 39 and saving for your first home or retirement, consider maximising your Lifetime ISA (LISA) contributions. You can invest up to £4,000 each tax year, and the government will add a 25% bonus—up to £1,000 per year. This is essentially free money from the government, so make sure you’re taking full advantage of this opportunity.
Benefit from Charitable Donations
Charitable donations under Gift Aid remain a powerful tax-saving tool with significant benefits for both you and the charity. Donations to registered UK charities allow the charity to reclaim 25p for every £1 you donate, at no extra cost to you. For example, a £100 donation becomes £125 for the charity once Gift Aid is applied.
If you are a higher rate taxpayer (40%), you can claim back an additional 20% (the difference between the 20% basic rate and your 40% rate) through your self-assessment tax return. For example, a £100 donation increased to £125 with Gift Aid would mean you could claim back £25, reducing the net cost of your donation to £75.
Charitable giving not only helps causes you care about but also reduces your tax liability—making it a win-win strategy.
Use Your Dividend and Savings Allowances
Make sure you also check your dividend and savings allowances. The dividend allowance for 2024/25 is £500. The personal savings allowance is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. If you have savings income, reviewing how it’s structured can help you stay within these limits and avoid unnecessary tax.
Wishing you a successful and stress-free end of tax year!