Year End Tax Planning for 2024/2025
Before I talk about year end tax planning, I wanted to say, as a tax advisor, I like our strange tax year of 6 April to 5 April! If you have ever wondered why the tax year starts on 6 April, it dates back to 1752, when New Years Day was 25 March, and we moved to the Gregorian Calendar which shifted dates 11 days on, resulting in a tax year starting on 5 April. Then in 1800, which was not a leap year in the Gregorian Calendar, we gained another day and the start of the tax year became and has remained 6 April.
Regardless of our rather strange tax year, the move from the 2024/25 tax year to the new 2025/26 tax year should focus our mind on some year end tax planning.
Key considerations include:
- Consider pension contributions, these are relieved on a “paid” basis, so have to be made before the end of the tax year to impact 2024/25. If you want to maximise your pension contributions, remember that at the end of 5 April 2025 any unused allowance from 2021/22 will lapse.
- Pension contributions are especially valuable if your total taxable income falls in the £100,000 to £125,140 range as tax relief due to pension contributions in this scenario are effectively relieved at 60%.
- If you or your spouse earn less than the UK personal allowance of £12,570, you can transfer £1,260 of unused allowance to your spouse saving up to £252 in tax.
- With interest rates higher than we were historically used to, don’t forget the savings allowance of up to £1,000 for basic rate tax payers or £500 for higher rate tax payers, and consider transferring investments between spouses to maximise the benefit of these allowances.
- Similarly consider using your full £20,000 ISA allowance for tax free savings.
- Think about whether pre tax year end dividends should be considered, to maximise allowances and lower tax rates across family shareholdings.
Everyone’s circumstances will vary, but even with (most) tax rates and allowances staying pretty fixed from one tax year to the next now, there is still merit in reviewing tax efficiency for all family members to maximise the few tax reliefs and benefits that still remain.
If you need any help or advice around tax planning, please contact us.
