Getting your personal tax in order before the year-end

As the tax year draws to a close, it’s important to think about your own personal tax situation and to make sure you’re maximising any potential allowances and reliefs.

Various annual allowances and tax bands will expire on 5 April each year. By taking advantage of these different tax brackets, tax-free allowances and concessions – and making sure this happens before the year-end – you can potentially realise some significant tax savings.

A checklist for your personal tax year-end tasks

We’ve highlighted the main personal tax year-end tasks to focus on, broken down by the various different taxes – all aimed at increasing your tax efficiency

1. Tax Bands:

   • If you have family members who haven’t used their personal allowance in the year (generally, £12,570 tax free income in 2024/25) consider whether or not they can be paid from your company for work they’ve carried out.
   • If you have any unused Basic Rate Band (generally the area between £12,570 and £50,270 income) think about accelerating income into this year if you may be above that threshold next year – this could mean paying out a dividend payment, or giving yourself a salary bonus etc.
   • If your income is between £100,000-£125,140, the marginal tax rate is 60% as personal allowances are tapered down. You might want to consider deferring income into the next year if you think that your income may be lower next year. You might also want to examine the possibilities for making additional pension contributions, helping you to extend your basic rate band.
   • Generally – consider whether income-producing assets should be transferred to your spouse, if your partner is in a lower tax bracket.

2. Child Benefit

   • The Higher Income Child Benefit Charge claws back part, or all, of any family’s child benefit from the highest-paid spouse whose income exceeds 650K. For every £200 of income over £60K, 1% of child benefits paid is clawed back. So, at £80K income and above, the whole of the child benefit is clawed back.
   • There are ways to mitigate this claw-back. Where one spouse is on a lower income than the other, see if it’s possible to divert income to the lower paid partner. This can then result in both partners achieving an income below the £60K level.
   • The relevant income can also be reduced by making additional pension contributions and gift-aided charitable donations.

3. Capital Gains Tax

   • The first £3,000 of capital gains are tax free (the annual exempt amount). If you’ve planned relevant disposals that can be split, then think about disposing of some within the current year and some next year to maximise the allowance.
   • If you have stocks and shares, for example, that show a paper profit but which you want to keep, you can take steps to minimise your capital gains tax (CGT) exposure. Consider selling some of the stocks/shares now to realise the gain within the tax-free allowance, and get your spouse to acquire them. This will save CGT on any future disposal.
   • Look into whether some assets could be transferred to your spouse, to benefit from both partner’s annual exempt amount on subsequent disposal.

4. Individual Savings Accounts

   • The maximum you can invest in an Individual Savings Account (ISA) in any tax year is £20,000, and the allowance can’t be carried forward. Interest rates are low, making cash ISAs less attractive than they once were. However, stock and share ISAs also give you benefits, not just in allowing tax-free dividends but also in allowing tax-free capital gains.
   • Taxable interest will also need to be included in your income tax calculation, and now that interest rates are higher, it is often the part of income that is forgotten. ISA can be a useful way to tax wrap your savings ( speak with your financial adviser)

5. Annual Pension Allowance

   • Unused pension contributions can be rolled forward for three years. Anything unused from 2021/22 will fall away on 5 April 2025. If you have contributions to roll forward from this period, make sure you do this before the coming year-end, or they will be lost. ( speak with your financial adviser)
6. Dividend and Salary Strategy for 2025/2026
   • Consider whether you need to change your salary and dividend strategy for 2025/2026 and discuss a tax review with your accountant to optimise your net earners. Also, consider patrolling your benefits in kind, ready for the mandatory changes in 2026/2027.

7. Miscellaneous

   • If you have no need to take dividend income, think about declaring £500 anyway, if available, as the first £500 is always tax free.
   • You can make gifts totalling £3,000 outside of any inheritance tax considerations, and any unused allowance from 2024/25 can also be utilised up to 5th April 2025 – both elements that should be factored into your year-end planning.

Talk to us about preparing for the tax year-end

Planning for the tax year-end helps you to stay tax efficient. So, there’s real value in running through the checklist above and getting your personal finances ready for the end of the tax year.

We can help you get your numbers in order and advise you on any elements where you might need some help or have queries.

 

 

Please note: This is not meant to constitute professional advice. It is generic guidance only and things may have changed since it was written –please always seek specific & tailored advice for your circumstances.