The end of the tax year is still a few months away, but it pays to think ahead now to ensure you maximise any annual allowances. Here’s your key checklist.
The end of the tax year is still a few months away, but getting started early can help ensure you make the most of the tax reliefs and allowances that are available to you.
Of the major allowances we’re focused on four essentials for the end of the tax year (5th April 2025):
- ISA and pensions
- Capital gains tax
- Gifts (to mitigate inheritance tax)
- Wills and pension beneficiaries
1. Use your ISA and pension allowances: Your ISA allowance works on a ‘use it or lose it’ basis. It’s worth squirrelling as much as you can up to the £20,000 limit (2024/25 tax year). If you’ve got the cash, top up. Alternatively, you can sell assets held outside an ISA and buy them back within an ISA - a strategy known as ‘bed and ISA’.
Using your annual pension allowance is just as important. You can get tax relief on contributions of up to £60,000 or 100% of your earnings, whichever is lower, though there is a taper in effect if your income is over £260,000. You can also carry forward allowances from the previous three years.
2. Check your capital gains tax position: The worst fears on capital gains tax (CGT) have not been realised, but higher rate taxpayers will still need to pay 24% on any gains made as part of the sale of assets. Investors have two main defences against this.
The first is to use your capital gains tax allowance of £3,000 each year. This means deliberately realising gains up to the limit to ensure they don’t build up. The second is to transfer assets between spouses. Transferring assets between spouses is tax free, therefore it makes sense to equalise your assets so that you both make use of your allowances.
3. Give gifts: Getting into the habit of giving gifts is an easy way to take some cash out of your estate for inheritance tax (IHT). You can give away £3,000 per year, every year.
You can also give regular gifts out of income. These can be as high as you like, providing you can show they don’t diminish your standard of living. You can also get tax relief for any gifts you make to charity.
4. Check your will and pension beneficiaries: It’s good practice to check your will and the ‘statement of wishes’ on your pension from time to time.
It’s all too easy to shove them to the back of a drawer and never think about them again. Your circumstances will change from time to time, and your preferences may need to change too. Checking once a year is good practice.
