Your Smart Guide to 2024/25 tax year end

As the tax year-end approaches, it's a good time to make the most of any tax saving opportunities available.

Whether it's ISAs, pensions, investment reliefs, or estate planning, getting ahead now can help to save you or your clients a lot in the long run.

We have considered below some strategies, that may help you wrap up your financial year in style.

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ISA Planning: Use It or Lose It!

Think of your Individual Savings Account (ISA) allowance as a "use it or lose it" deal. For 2024/25, you can save up to £20,000 tax-free, but if you don’t use it by 5th April, you can’t carry this forward.

With changes to dividend and capital gains tax, ISAs are more valuable than ever. Plus, who doesn’t love tax-free growth?

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Investment Reliefs with EIS, SEIS, and VCTs

If you’re open to a bit of risk for some generous tax reliefs, the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs) are worth a look. These schemes encourage investment in early-stage businesses with generous tax incentives:

• EIS – 30% income tax relief on up to £1 million per year, plus capital gains tax (CGT) deferral.
• SEIS – 50% income tax relief on up to £200,000, with additional CGT reinvestment relief.
• VCTs – Tax-free dividends and 30% income tax relief on investments up to £200,000.

While these can be beneficial, they come with higher risks, so we recommend obtaining professional investment advice before taking action.

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Pension Planning

The annual allowance for tax-free pension contributions is £60,000 for the current tax year. If you haven’t used your full allowance from the past three years, you can carry it forward until 5th April 2025. However, high earners need to watch out-your allowance could be tapered down if your income exceeds £200,000.

Please note, we recommend weighing this up against the inheritance tax changes from April 2027 that might impact your beneficiaries.

If you are unsure what is the best saving strategy for you, please do not hesitate to get in touch.

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Reducing your Income Tax bill

Earning over £100,000? Watch out for the 60% tax trap-as your personal allowance gets phased out, your effective tax rate increases.

A few potential options on lowering your tax liability include:

• Pension contributions – Reduce taxable income while saving for the future.
• Gift Aid donations – Cut your tax bill and support a good cause.
• Dividend and savings tax allowances – Make the most of the tax-free thresholds.
• Spouse and family tax planning – Reallocating income to use both partners’ allowances efficiently.

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Estate Planning

If you want to pass on wealth in a tax-efficient manner, you could consider some of the strategies below:

• Gift up to £3,000 tax-free annually – Plus, smaller gifts of £250 per person don’t count toward IHT.
• Gifting for weddings – Up to £5,000 for a child’s wedding is free of IHT.
• Seven-year rule – Gifts made seven years before death escape IHT, provided you survive the full period.
• Trusts and Family Investment Companies (FICs) – These can be great options to explore for structuring wealth to maximise tax efficiency.

Final Thought...

The tax year-end is a great opportunity to tidy up your finances, potentially reduce your tax bill, and boost your savings.

Whether it’s maxing out ISAs, making pension contributions, optimising CGT, or planning for inheritance tax, a little strategy now can help lead to savings in the future.

We recommend seeking advice before implementing any of the above strategies. If you have any questions concerning the above, please do not hesitate to get in touch.