As 2025 gets under way, it’s that time of year again to start considering your tax year-end planning.
The traditional drivers have always been the tax year-end (Saturday 5 April 2025) and the Spring Budget – this year though there is no Spring Budget, as Rachel Reeves will deliver a Spring Forecast in late March.
Following the Autumn 2024 Budget, there is plenty to consider:
- Pension contributions: The Budget announcement that pensions will fall within the scope of inheritance tax (IHT) from 2027/28 makes reviewing pension contributions slightly different from previous years. For most people, pensions remain a highly tax-efficient way of saving for retirement, but for some, this might no longer be the case.
- Capital gains tax (CGT): CGT rates increased in the Budget to 24% for higher and additional rate taxpayers and 18% for other taxpayers. If you haven’t used your annual exemption – £3,000 of gains – you should consider doing so.
- IHT: Now is the time to use your annual exempt amount (£3,000 per tax year) for 2024/25 if you haven’t already done so. If you didn’t use your full exemption from 2023/24, you can also gift the unused element after you have exhausted this year’s exemption.
- Marriage allowances: If you or your spouse/civil partner had income below the personal allowance in 2020/21 (£12,500), you have until 5 April 2025 to claim the marriage allowance for that year (£1,250) – this could produce a tax saving of up to £250. A claim can only be made if the other partner was a basic rate taxpayer (starter, basic or intermediate rate in Scotland) in that tax year. The same principle applies (with an allowance of £1,260) for 2021/22 and subsequent years onwards.
- Threshold planning: The long-term freezes that have applied to income tax allowances and many thresholds may mean you move into a higher tax band in the coming tax year. Or you could find yourself crossing the unchanged £60,000 threshold for the high-income child benefit charge or the £100,000 threshold for personal allowance taper and loss of tax-free childcare. Among the strategies to beat the unmoving thresholds, you could bring forward income into 2024/25 (for example, by closing an interest-paying account) or move some income-generating investments across to your (lower income) spouse or civil partner by 5 April.
Tax year-end planning is an important consideration and it’s best to seek advice before taking any action.
The above was provided by Hartey Wealth Management Limited. Registered office: Hilliards Court, Chester Business Park, Chester, CH4 9QP.
Tel: 0808 168 5866. www.harteywm.co.uk
Hartey Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority
Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.