The 2024/25 tax year draws to a close on 5th April. With it vanish a whole years’ worth of tax allowances. Many will not roll over, and if you delay until April 6, they are lost for good. On the other hand, by checking now and planning ahead, you could make the most of tax allowances, reduce liabilities, and avoid last-minute stress.
At Continuum we are looking at the top tips to help you prepare.
1. Check you’ve made the most of your ISA allowance
Putting your money into an ISA means you won’t pay a penny in income tax, dividend tax or capital gains tax on interest, income or profits. This means it could be worth moving any investments into a Stocks and Shares ISA, and savings into a Cash ISA.
But there is an annual limit on what you can shelter from the taxman.
Currently, you can pay in a maximum of £20,000 across all your ISAs (the junior ISA has a separate £9,000 limit) each tax year. It’s “use it or lose it”. You can’t roll over any unused allowances into the next tax year.
You may want to consider getting your money behind an ISA now. If you're looking to invest but want to avoid making a rushed decision, you can temporarily place your funds in a Cash ISA and decide on your investment strategy later.
2. Check you have transferred assets to your spouse
Your spouse or civil partner has their own tax allowances, and if they are not making full use of them, you can transfer your assets to them. Transfers to spouses are exempt from capital gains tax, and if your spouse is in a lower income tax bracket, if any tax is owed, they will pay it at a lower rate.
3. Check you have claimed marriage allowance
Your spouse could also help you reduce tax if you claim marriage allowance. This applies to couples where one partner does not pay income tax or has income below the £12,570 personal allowance. Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. If eligible, couples can also backdate their claim for the previous 4 tax years and receive a lump-sum payment worth more than £1,000. Check the HMRC website for help.
4. Check you have made the most of your pensions
You can pay up to £60,000 into your pension this tax year (or 100% of your income if its lower than the £60,000 limit) and get tax relief. You can also call on any unused allowances from the three previous tax years. However, you must have been a member of a registered pension scheme during those years to use carry forward option.
If you're a higher-rate or additional-rate taxpayer, pensions tax relief, could mean an extra 20% or 25% on top of the basic 20%.
5. Check on your children
Consider your children's financial future. You can make pension contributions to their accounts, and they are eligible for tax relief on these contributions, even if they are non-taxpayers.
A pension for a child may seem odd, but it's a useful way to maximise tax savings and help ensure they have a retirement fund. Investing the maximum allowed of £3,600 on behalf of a child will cost you only £2,880. A top-up of £720 from the taxman is added to your contribution.
A Junior ISA (for children under 18) could also be a way to invest tax efficiently for your children, but unlike a pension they will be able to access the money much earlier, from 18.
6. Check you are claiming tax reliefs
Ensure you are claiming the tax reliefs available to you. As well as Marriage Allowance this could include:
- Work-From-Home Relief: If you work from home, you may be able to claim tax relief on certain expenses.
- Charitable Donations: Donations made through Gift Aid allow charities to claim an extra 25% on your donation, and higher-rate taxpayers can claim further relief via their self-assessment.
7. Check your tax code
If your tax code is wrong, you could be paying thousands in extra tax. So, it's important to check your tax code.
The code is normally a mix of letters and numbers; the most common tax code is 1257L.
If you're on the wrong tax code, you can claim back any overpaid tax for the last four tax years. There's more information on gov.uk about how.
8. Check in with a Continuum expert
Tax is complicated, and expert advice is vital. At Continuum we can help provide the expertise you need – but hurry. With the tax year - and allowances for the year – ending on April 5th, you need to act fast.
But we won’t stop there. We can work with you to plan a tax strategy which is designed to help you reduce your tax liability next year too. Call us today.
Tax relief when you donate to a charity: Overview - GOV.UK
Marriage Allowance: How it works - GOV.UK
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of an investment can go down as well as up and you may get back less than you invested. When investing Capital is at risk.
A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.
Investments do not include the same security of capital which is afforded with cash accounts.
Investors in ISA’s do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances. We recommend that the investor seeks professional advice on personal taxation matters.
The Financial Conduct Authority does not regulate taxation advice or deposit accounts.
